| Accounting,as a result of rapid growth of enterprises,is the measurement,processing,recording and reporting of economic activities about economic entities.Accounting information is the product of accounting,which reflects the results of economic events happened in the past,current and future.Meanwhile,the enterprise is the combination of a series of contracts.Different stakholders who estaiblish contracts with the enterprise have different needs for accounting information.As the result,the usefulnesses of financial reports are different in satisfying the information needs of different skateholders.Thus,how to achieve the“best”quality and amount of accounting information between these stakeholders,and further assist decision making of these parties,is attracted attentions from investors,creditors,regulatory and other types of stakeholders.Otherwise,under the dual-disclosure reporting system,how the dual-disclosure reporting systems about reporting both the consolidated and parent financial statements meet the needs of different stakeholders,is also one of hot issues discussed by academia and regulatory bodies.Accounting information as a kind of public product has externality and limitations.Thus,information asymmetry always exsits in the market,and can expose a probability of loss to investors who are at information disadvantage.Thus,standards setting become important to protect these kinds of investors.In order to decrease information asymmetry,accounting standards define the basis of financial accounting policies and practices,and probit the produce and disclosure of accounting information in an unregulated way.However,accounting standards do not keep consistent.With the development of economy,previous standards cannot meed the information demands.As a result,standards reforms took place.Reviewing the history of Chinese accounting reform,the development of marketization and internationalization of Chinese economy promote the advancement of Chinese accounting standards reform,and promote the developments of standards reform towards the convergence with international accounting satndards.Finally,On 15th February of 2006,China's regulatory body,the Ministry of Finance,published a new Chinese accounting standards,called“Accounting Standards for Business Enterprises”(new CAS),and require the formal implementation since 1st January,2007.The new CAS includes one basic standard,38 specilized standards and application guildance,which cover almost all economic events about different types of corporations.Therefore,it considered as one of most important standards reform in China,and has milestones significance.Among them,Corporate Accounting Standards No.2-Long-term equity investments make substaintial changes to the measurements for subsidiaries investing activities,which will affect the financial statements and corporate behavior.Therefore,based on the significance of the accounting standards reform in 2006and the dual-disclosure reporting system,this paper investigates the impact of disclosing consolidated and parent financial statements on the decision making of debtholders of the parent company,the impact of standards reform on the credit usefulness of financial statements,the corporate response,and the behind economic motivaitons.More specifically,taking the perspective of debtholders of the parent company,this paper analyzed the dual-disclosure of financial statements whether lead to different usefulnesses of credit decisions.Which financial statement is more useful for the credit decisions of debtholders?Based on the 2006 standards reform,this paper consideres the impact of standards reform on the decision usefulness of debthoders.Considering the importance of business group,this paper analyzes whether the changes related to the long-term equity investments standards will influence the dividend policy of subsidiaries and the corporate behavior of the parent company.Finally,what kind of motiviation leads to the changes of above corporate behaviors?With above research questions,we applied the economic consequnces theory of standards reforms,information asymmetry theory and contract theory,establishing the academic framework related to standards reforms and usefulness of financial statements and corporate behaviors.With the academic anlaysis and empirical analysis,this paper reaches the following conclusions:Beginning,compared to the consolidatd financial statements,the parent financial statements are more useful for creditors to make decisions on loans.The empirical results suggest that,as a whole,the financial factors both in consolidated and parent financial statements are significantly realted with the debt raising for the parent company,which suggests that financial statements are determined to be useful for the decisions for the creditors.Meanwhile,the explanatory power of the parent regression model is significantly higher than the explanatory power of the consolidated regression model,which suggests htat the financial information on the parent financial statements are more useful for the creditors.After considering the impact of the accounting standards reform,we find that the usefulness of the parent financial statements is decreased.However,the difference between the consolidated financial statements and the parent financial statements provide incremental usefulness of the creditiors.Additonal analyses show that,there is no significant different between the usefulnesses of consolidated and parent financial statements for creditors when their decisions are about the short-term debt.As for the long-term debtholders,the parent financial statements are more useful.Besides,the usefulnesses of the parent financial statements for the creditor are proved to be more important for companies are state-owned and non-state-owned.Next,the measurements of long-term equity investments influence the profit sharing between the subsidiaries to its parent company,and which offers new opportunity for the corporate behavior of coloring financial statements.Our empirical results suggest that,after the implementation of new CAS,the elasticity of subsidiary dividend increases.When the part of parent profits without subsidiary dividend suffers loss or declines,the management of the parent company takes advantage of dividend from subsidiary to color the parent financial statements.Additional analyses also show that,when the parent company is investment-oriented company,has decentralized financial management with its subsidiaries,or has larger weight of business scale of subsidiaries compared to the group business scale,they will manage the parent profits through influency subsidiaries'dividend policies.Finally,this paper finds that the behind motivation that leads to the management of parent financial statements through increasing the dividends of subsidiaries is related to debt financing.The empirical results suggest that,the increase of subsidiaries dividend is significantly positive with new debt financing of the parent company,that is to say,the parent company successfully gets the loans when they takes advantages of subsidiaries'dividends after the implementation of new CAS.Additional analyses,show that,when the parent company has decentralized financial relationship with its subsidiaries,or has larger weight of business scale of subsidiaries compared to the group business scale,or is located in areas with lower degree of marketization,or suffers higher level of financial constraints,they have large motive to managing tge parent financial statements through increasing subsidiaries dividends.Compared to previous studies,this paper makes the following contributions:Beginning,based on the dual-disclosre reporting system,starting from the concept of legal subject,taking the perspective of debtholders,this paper investigates the usefulness of consolidated and parent financial statemetns.These results show that parent financial statements are more useful for the credit decision of the debtholders,which fulfills existing researches on the usefulness of financial statements from the only aspect of investors.Our results help to analyze the difference between consolidated and parent financial statemtns,which remedying current researches lack of clearing the boundaries between the two types of financial reports,which finally expanding existing literature about the usefulness of financial statements.Next,based on the profit sharing of subsidiaries,this paper analyzes the relationship between subsidiary dividends and manipulation of parent financial statemetns.We find that when parent company suffers loss or declines,the parent company will let the subsidiaries transform larger amount of dividends to the parent company as for manipulating the parent financial statements.This paper expands existing literature relate to the motivations of the subsidiaries dividend.Finally,based on the standards reforms of long-term equity investments,this paper deeply investigates the impact of standards reforms on the usefulness of financial statemetns,corporate behavior of parent company and debt financing.Our results suggest that,with the changes of accounting standards,the usefulnesses of consolidated and parent financial statements are changed.What's more,the manipulation of parent financial statements under the standards reforms increase the debt financing of the parent company.Previous studies about standards reforms are most related to the impact of standards on the quality of financial information and the market,and most are taking the standards as a whole.Thus,there are few studies analyzed from the specific standards,and taking the dual-disclosure reporting system together.This paper takes the view of the debt holders,which helps to understand the difference and cooperation between the two financial statements.Moreover,our results reveal the impact of standards on corporate behaviors and economic motivations,which further expands the current reseaches about economic consequences of standards reforms. |
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