Economic Consequences Of Enterprise Asset Quality

In February 2006,in order to meet the requirements of the development of market economy in China and realize the integration with international accounting standards,the Ministry of Finance of our country promulgated new accounting standards.The new accounting standards have been continuously updated and perfected.The new accounting standards have shifted the concept of income and expenses that has always been followed to the view of assets and liabilities.The new standards began to be implemented in listed companies the following year.Now after more than 10 years,the new accounting standards have been implemented,and the status of assets has been increasing day by day.Making the function of asset quality more important,asset quality will cause more extensive concern to users of financial statements,asset quality will play an important guiding role in economic development.Assets are not only its main support and strength,but also the most important help to promote national economic development.In the process of resource allocation,capital allocation is the most important component.The effectiveness of capital allocation determines the future development of enterprises and the economic growth of the country.Capital allocation plays a very important role.From a macroeconomic point of view,capital allocation can increase future cash flows,thus providing a boost to economic growth;from a microenterprise perspective,Capital allocation plays an important role in all kinds of decisions of the company.It is related to the execution and effect of the company's decision,to the risk that the company has to bear in the decision,and to the income that can be obtained.The possibility and scale of future development play a very important or even decisive role.By fully reading and analyzing the relevant materials,we can conclude that the information transparency of enterprises can be improved.As an important accounting information,asset quality information will play an important role in the process of capital allocation.However,in reality,because of the information asymmetry and agency problems between the two parties,the investing party will generally want to receive more income than they deserve to cover the monitoring costs and risk compensation funds.As a result,the external financing cost is higher than the internal financing cost.Therefore,there is a common problem of financing constraints.The management of the enterprise may lead to underinvestment or overinvestment in order to maximize the personal benefits.It is very difficult for enterprises to realize optimal investment scale.Information asymmetry and agency problems will lead to financing constraints and investment failure.Asset quality can have an important impact on institutions or individuals involved in market economy activities.These institutions and individuals include investors,creditors,governments,enterprise management,etc.Higher asset quality can enhance the level of business management and lead stakeholders to make reasonable decisions.The improvement of asset quality is conducive to the improvement of capital allocation efficiency.After the reform and opening up,various aspects of the country have undergone rapid development,especially the economic situation,with the continuous development of the economy.The implementation of the new accounting standards provides more space for enterprise managers to choose accounting policies.There is also a higher demand for the quality of information reflected in the statements.At present,many studies in this area are focused on accounting earnings,and there are few studies on the economic consequences of asset quality.However,On the basis of clarifying the connotation and characteristics of asset quality,this paper systematically analyzes the economic consequences of asset quality of listed companies from the perspective of capital allocation.Based on the full understanding and research of relevant research materials and information at home and abroad,this paper uses the methods of literature research,normative research and empirical research,as well as quantitative analysis and qualitative analysis.These three research methods are used comprehensively to analyze and study the relationship between asset quality and capital allocation efficiency.This paper starts with the theory of asset liability,the economic consequence of accounting standards,and so on.This paper discusses the specific influence of asset quality on debt financing,equity financing and investment efficiency of enterprises,and further analyzes the property of ownership,financing constraints and different industry conditions.The possible influence of asset quality in the process of capital allocation,through the analysis of the conclusion,causes the enterprises to understand and pay attention to the asset quality,and provides a certain theoretical supplement for the impact of accounting information disclosure.In this paper,the data related to the economic consequences of asset quality are firstly collected and analyzed,and the existing research results are summarized.Then,it analyzes the relevant theories and institutional background of asset quality and capital allocation;then,it analyzes the definition and characteristics of asset quality,and puts forward a method to measure asset quality.In the part of empirical analysis,according to the basic theory of this problem,from the agent theory and information asymmetry,we analyze the impact of asset quality on capital allocation.This paper analyzes the methods and approaches of the influence of asset quality on capital allocation,and carries on the empirical test in three parts: the first part,the function of asset quality on enterprise debt financing,the second part,the function of asset quality on enterprise equity financing.The third part,the effect of asset quality on the investment efficiency of enterprises,that is,the effect of insufficient investment and excessive investment.Further,considering the property of ownership and financing constraint,the paper analyzes the effect of asset quality on debt financing,the effects of equity financing and investment efficiency.First,high-quality assets promote debt financing for enterprises,enabling them to access financing at lower debt financing costs;further,after considering the nature of ownership and the impact of financing constraints,it is found that in non-state-owned enterprises,For listed companies with low financing constraints,the impact of asset quality on debt financing relationship of listed companies is more significant.By analyzing the influence of asset quality on debt financing cost,it is found that the improvement of asset quality will reduce debt financing cost effectively in manufacturing industry,but this effect is not obvious in high-tech industry.Secondly,the higher the quality of assets,the lower the cost of equity capital.The influence of asset quality on the cost of equity capital is more obvious.In addition,this paper analyzes the impact of asset quality on the cost of equity capital from the perspective of two special industries,manufacturing industry and high-tech industry.The improvement of asset quality will effectively reduce the cost of equity capital,but in the high-tech industry,this effect is not obvious.Thirdly,for Chinese enterprises,especially those listed on the market,the improvement of asset quality will improve the investment efficiency.In addition,after considering the influence of ownership and financing constraints,it is found that,in non-state-owned enterprises,it is more obvious to reduce the investment underinvestment of enterprises,and the effect of asset quality on over-investment is more obvious.Further,after considering the effects of ownership and financing constraints,it is found that in non-state-owned enterprises,In addition,this paper analyzes the impact of asset quality on investment efficiency from the perspective of two special industries,manufacturing industry and high-tech industry.It is found that in the manufacturing industry,the improvement of asset quality will effectively improve the investment efficiency of enterprises,but in the high-tech industry,this effect is not obvious.The research in this paper is innovative,and its academic contribution is mainly shown in the following two aspects:Firstly,through theoretical analysis and practical investigation,this paper studies the economic consequences of asset quality from the perspective of capital allocation,and examines the impact of asset quality on debt financing,equity financing and investment efficiency,respectively.It broadens the research field of the existing asset quality literature and realizes the innovation of the research from the perspective of capital allocation.At present,the data and research on the economic consequences of asset quality are relatively few,and most of the studies focus on the establishment of the evaluation index.This paper studies the economic consequences of asset quality from the perspective of capital allocation,emphasizes the important role of asset quality,and enriches the research results of asset quality.It adds new ideas for stakeholders to better understand the supply of accounting information,and at the same time expands the research perspective of accounting information quality.Secondly,this paper analyzes the inherent relationship between asset quality and capital allocation efficiency.It is pointed out that asset quality has an important influence on capital allocation,which provides a new perspective for the study of capital market.The existing literatures mainly focus on the quality of accounting information,the quality of earnings,and the efficiency of capital allocation.The widening of this paper will expand the research field of capital allocation efficiency and enrich the research results of capital allocation efficiency.