The Determinants And Economic Consequences Of Accounting Conservatism

Accounting conservatism, as one of the requirements of accounting information quality has been a long time, however, the reasons for its existence and its impact on the business research has started in the last century 90s. In this paper, we first overview the domestic and foreign literature about conservatism ,and given some explanations based on contract theory, agency theory and signaling theory ,and also analysis the special nature about determinants and economic consequences of accounting conservatism in the Chinese market. Measured using two methods of accounting conservatism,empirical analysis the determinants and economic consequences of accounting conservatism Based on the Chinese market, and draw some useful conclusions.In the determinants, this paper found that: asset-liability ratio and accounting conservatism level was significantly positively correlated, this situation that is more evident in state-owned enterprises; the first largest shareholder equity ratio and accounting conservatism level was significantly negatively correlated , this situation that is more evident in Non-state enterprises; the corporate of CEO shareholding, showing low levels of accounting conservatism; The reform of accounting standards, has improve accounting conservatism level, but a comprehensive consideration, the effect of accounting standards'reform on accounting conservatism does not have a significant. In the economic consequences, this paper found that: the level of accounting conservatism and business investment spending has significant negative correlation, the situation is more obvious in the Non-state enterprises; The level of accounting conservatism and the cost of debt have a significantly negative relation, the situation is more pronounced in state-owned enterprises; the level of accounting conservatism and cash dividend have a significantly negative relation, the situation is more obvious in the Non-state enterprises; the level of accounting conservatism and the vale of enterprise have a significantly positive relation, the situation more pronounced in state-owned enterprises.Overall, considering China's actual conditions, a more comprehensive study about determinants and economic consequences of accounting conservatism, especially about its economic consequences, our evidence to draw some meaningful conclusions and provide evidence about accounting conservatism in favor of corporate governance in the Chinese market.