Empirical Research On Accounting Conditional Conservatism Based On Executives Salary Contracts And Debt Contracts

Accounting conservatism is an important convention of financial report. It has even been recognized as one of accounting information quality characteristics in China. In other words, conservatism is playing an important role in practice as well as in drafting principles. In 2006, the Ministry of Finance issued the new accounting standards which made a large number of amendments vs. the original criteria, and achieved a convergence with the international accounting standards. However, the new accounting standards has been implemented for three years, in the three-year period encountered a global financial crisis, then, what change will happen to accounting conservatism which is a measure of accounting earnings quality has become a matter of concern.Based on this background, the article selected all A share listed company data of Shanghai Stock Exchange and Shenzhen Stock Exchange in 2005, 2006 and 2007, 2008 as the study sample, used Basu Model to study the existence and changes of conservatism before and after the implementation of new accounting standards, also as the salary contracts and debt contracts have more impact on the accounting conditional conservatism(Watts,2003) ,so this article studied after the implementation of new accounting standards, if executives salary and debt contracts have impact on the accounting conservatism.The major empirical results in the article are listed as follows:(1)Accounting conservatism existed in the year 2005-2006 and 2007-2008. After the implementation of the new accounting standards, the conservatism of accounting earnings reduced and the "true and fair" of accounting information has been improved. (2)Executives salary and debt contracts have impact on the accounting conservatism of China's listed companies, and to some extent they all reduce the risk of fraud which was caused by Information Asymmetry, thus increase the conservatism of listed companies.