| Accounting information is an important source of company information. One of the important characteristics of high quality accounting information is accounting conservatism, i.e. as there is a higher validation requirement for accounting surplus to confirm good news than to confirm bad news, the accounting surplus can timelier reflect bad news than good news. This kind of asymmetric timeliness of accounting confirming good news and bad news is called accounting conservatism. Accounting conservatism plays an important role in corporate governance. Because sound accounting information can signal to the shareholders and creditors in a timely manner and alleviate information asymmetry, it is beneficial to reducing the financing cost, improving the efficiency of financing, and alleviating over-investment and under-investment and other problems and thus better protecting the interests of investors. At the beginning of the 21st century, the outbreak of Enron, WorldCom and other major financial frauds and the global stock market decline caused the high attention of the theory and practice cycles to accounting information quality. Accounting conservatism has become the focus problem of scholars, investors, analysts, regulators and financial media.At present, China is in an economic transition period and there is a special system background. For instance, equity concentration and protection level to investors are not high, manager market is not sound, market takeover mechanism is weak, etc. The agent conflict between ultimate control shareholder and outside investors has become the main contradiction of the listed companies in China. Under the background of China's specific system, how can an ultimate controlling shareholder affect the accounting conservatism? Has the protection to investors improved the conservatism level of the disclosure of accounting information or not? Has the relationship between an ultimate controlling shareholder and accounting conservatism been affected by the protection to investors or not and how it has been influenced? All these problems are theory and practice problems that need solution in the current development of Chinese capital market and corporate governance, and it is a more realistic perspective for research on accounting conservatism.Through a survey of the relevant literature, the following problems exist in the domestic scholars'study on the accounting conservatism in China's listed companies:1) Lack of comprehensively theoretical and empirical analysis of how an ultimate stakeholder affects accounting conservatism, such as pyramid shareholding structure, pyramid hierarchy, the ultimate controlling shareholder assigning board seats and characteristics, etc.2) Lack of the research on how the protection to investors affects accounting conservatism, such as the time difference and regional difference of the level of protecting investors, etc.3) Lack of the in-depth exploration of how the interactive items between the protection to investors and an ultimate stakeholder affect accounting conservatism.4) Lack of the in-depth exploration of accounting conservatism system background of the listed companies in China.Therefore, this paper focuses on the influence of the interactive items between an ultimate controlling shareholder and the protection to investors on accounting conservatism and discusses the ways or methods to improve the quality of accounting information, including accounting conservatism.Under the background of China's special system, the research on the relationship between ultimate controlling shareholder, investor protection and accounting conservatism is of great importance. It mainly displays as the following:1. The analysis of the predatory behavior and information manipulation of ultimate controlling shareholder and disclosure of the mechanism of action of ultimate controlling shareholder in accounting conservatism can help enhance the efficiency of the contract, help investors make rational investment decisions and slow down the information and agency problems.2. The disclosure of the mechanism of action of investor protection in accounting conservatism and quest for the system factor of improving accounting conservatism can help enhance the transparency of the listed companies and stock exchange market's operation, lower down the moral hazard and opportunistic behavior of information disclosure subject, promote the continuous improvement of corporate governance mechanism and accelerate the healthy development of stock market.3. The analysis of whether and how the relationship between ultimate controlling shareholder and accounting conservatism changes with the change of investor protection, exploration of improving the quality of the accounting information ways or methods including accounting conservatism can help provide the empirical evidence and policy suggestions for the listed companies' accounting information quality and transparency, decreasing information asymmetry, and optimizing the capital market allocation of resources.The research contents of the thesis include five aspects.1. The thesis has a review on the literature regarding the investor protection, ultimate controlling shareholder, and accounting conservatism. Through the literature review, it is found as for the ultimate controlling shareholder, Chinese and foreign scholars mainly make a deep research from the perspective of the distribution of ultimate controlling shareholder, earnings management, value of the company, and accounting information, etc.. As for the aspect of accounting conservatism, Chinese and foreign scholars mainly focus on the accounting conservatism measurement, existence of accounting conservatism, and the influence factors of accounting conservatism. As for the aspect of investor protection, Chinese and foreign scholars mainly research on the impact of investor protection on capital structure, corporate value, financing costs, and accounting information, etc.. The study finds regarding the exploration of the relationship between ultimate controlling shareholder, investor protection and accounting conservatism, foreign scholars carry out the comparison of equity ownership structure under different source of law in different countries (including the ultimate ownership structure) and accounting conservatism, however, they neither carry out the research on the impact of time difference and regional difference on accounting conservatism of investor protection level in a specific country nor survey whether and how investor protection impact the relationship between ultimate controlling shareholder and accounting conservatism. In China, there are many insufficiencies in terms of the research on the relationship between ultimate controlling shareholder, accounting conservatism and investor protection such as incomplete contents and single method etc..2. The thesis carries out the analysis of the listed companies accounting system, corporate governance feature, capital market development situation, investors legal protection and other system background and provides the realistic background and theoretical basis for explaining the relationship between ultimate controlling shareholder, accounting conservatism and investor protection in China. The research finds the Chinese accounting conservatism principle was introduced from foreign countries in the process of transformation of the planned economy to market economy and was intensified in the process of China's accounting and international accounting integration and convergence. China's unique institutional background and the accounting and securities supervision thus occurred are the external institutional causes. Although the investor protection system has been perfection increasingly, the entire investor protection level is low. These institutional systems decided the relationship of ultimate controlling shareholder, accounting conservatism and investor protection owns its own feature of Chinese listed companies.3. This thesis analyzes from the perspective of theory the relationship of ultimate controlling shareholder, accounting conservatism and investor protection and puts forward the research hypothesis. The pyramid shareholding structure can enlarge, under the guarantee of no power dilution, the ultimate controlling shareholder's control right, realize the control of value-doubled company with relatively slight cash flow right, thereby, increase the ultimate controlling shareholder's predatory motivation and ability. To avoid the law sanction and social supervision, controlling shareholder covers his opportunism behavior through manipulating financial reporting process and information disclosure policy. Therefore, the pyramid shareholding structure and the ultimate controlling shareholder's equity characteristics impacted by it (including pyramid hierarchy, cash flow right, two-right deviation, dispatched directors, etc.) impact on the level of accounting conservatism of the listed companies. Investor protection impacts on the concentration level of equity and is the important mechanism of inhibit the predatory behavior of controlling shareholder, and the important measure of solving the quality problem of the accounting information.4. This thesis adopts the accounting conservatism measurement model to test the ultimate controlling shareholder's features (including pyramid hierarchy, cash flow right, two-right deviation, dispatched directors, etc.), investor protection (including time difference and regional difference of investor protection) as well as the impact of their interactive items on accounting conservatism level of the listed companies in China. The research finds the mechanism of action of impact factor of accounting conservatism in the western countries to accounting conservatism cannot completely explain the accounting conservatism situation in China. Implementing accounting conservatism principle from the level of Chinese system has a relatively big influence on accounting conservatism. The accounting conservatism level of company owning pyramid shareholding structure is lower than that of the company not owning pyramid shareholding structure. The arrangement of pyramid shareholding structure of ultimate controlling shareholder intensifies the agency conflict between the ultimate controlling shareholder and external investors. Pyramid hierarchy is negatively related to the accounting conservatism, that is, the more the company's pyramid hierarchy is, the lower the level of accounting conservatism. The ultimate controlling shareholder of these companies may become a block force of timely disclosure of accounting information. The cash flow right of ultimate controlling shareholder has a negative influence on the accounting conservatism, which is caused mainly by delaying to confirm losses. The bigger the two-right deviation of ultimate controlling shareholder in a company is, the lower the accounting conservatism. The difference of the accounting conservatism between SOE and non-SOE's ultimate controlling is relatively big. For instance, compared with a SOE's ultimate controlling, the negative influence of the pyramid hierarchy of a non-SOE's ultimate controlling company on accounting conservatism is bigger. The bigger the two-right deviation of SOE's ultimate controlling shareholder is, the less conservative the accounting. In terms of cash flow right, compared with a non-SOE's ultimate controlling company, the bigger a SOE's ultimate controlling shareholder's right of holding cash flow is, the more likely to delay to confirm bad and good news. The director dispatched by ultimate controlling shareholder can intensify the control to the board of directors but without increasing his shares. The ultimate controlling shareholder dispatches director to control the benefits of the shareholders, the more representatives he dispatches, the less the benefits of other corporate subjects representing creditors and staff. The governmental background of the director dispatched by the non-SOE's ultimate controlling shareholder lowers down the accounting conservatism. The governmental background is a kind of valuable resource, which can bring obvious benefits of policy like convenient finance, tax preference and less governmental governance etc.. In such a way, the market demand for conservative accounting information of corporate operation and management is lowered down. Investor protection, to a certain extent, improves the accounting conservatism. The relatively higher level of investor protection in the east region of China promotes the improvement of accounting conservatism in the region. However, the promotion function of investor protection in China to accounting conservatism is not fully exerted. With the increase of the level of investor protection, no sufficient evidence shows investor protection lowered down the pyramid hierarchy, ultimate controlling shareholder's cash flow right, two-right deviation as well as the negative relationship between the director dispatched by the ultimate controlling shareholder and accounting conservatism. The research conclusion affirms the explanation of the principal-agent theory, asymmetric information theory and the theory of investor protection etc. to the influencing factors of accounting conservatism and effect direction.5. Based on the conclusion, the thesis puts forward policy suggestion on improving the accounting information quality, reducing the information asymmetry, relieving the contradictions of principal-agent, protecting the interests of investors, and optimizing the allocation of resources of capital market. |
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