The Research Into The Impact Of Corporate Governance On The Accounting Conservatism

In modern enterprise system, the separation of ownership and control of the corporate governance caused agency problems. Company managers relative to company external stakeholders with information superiority, due to the different interests and contract incompleteness, they have motives to exaggerate earning number. In order to maximize self interest, they will reflected their intention in the accounting information, and eventually to achieve it through the accounting earning manipulation, their don't disclosure bad accounting information but just give good news, namely damaged the accounting conservatism. This makes the company's external stakeholders cannot understand the company's true operational and financial situation, or even a hidden crisis, their interests will be undermined. Therefore, in order to protect small shareholders'interest, to curb insider reporting manipulation has become an important task of accounting.To improve the conservatism of corporate accounting statement has become an effective tool to alleviate the agency problem. Accounting Conservatism, especially the condition Conservatism recognize the losses more timely than the benefits, this asymmetry would help contain the managers'opportunism of virtual estimated earnings and net assets, intended to protect the small shareholders' interest.The corporate governance is a key factor which affects the conservatism of the company's financial statements. In the view of Contract Theory, as well as between the shareholders and the shareholders, between shareholders and executives is to pursue their own maximize interests under the established contract. In this process, the parties of the contract make such will be reflected in the accounting information. According to Professor Zhang, corporate governance is a solution mechanism to a variety of agency problems within the company, which provides the relationship among different elements'owner, especially through the explicit and implicit contracts on the residual claim and control distributed, thus affecting the relationship between entrepreneurs and capitalists. Therefore, the accounting earnings information is affected by corporate governance structure. Accounting Earnings conservatism is an important quality characteristic of financial report, which will inevitably be subject to corporate governance factors.This Thesis from the perspective of corporate governance, researched the impact of corporate governance to the accounting conservatism of listed companies in China. According to the research of Professor Li, corporate governance structure includes internal governance and external governance aspects. Follow this line of thought, this Thesis first verify the existence of the accounting conservatism in Chinese list corporation's financial report, select internal and external company governance factors such as the ultimate controller's type, equity concentration, board independence and insider control extent and strength of the external debt covenants, studied the impact which company governance structure affect the accounting conservatism, with a view to improve corporate governance to improve the accounting conservatism, to protect the company interests of external stakeholders will not be damaged.This Thesis integrated use of contract theory, principal-agent theory and asymmetric information theory. Firstly, we analysis the impact which corporate governance factors affect the accounting conservatism from the theoretical, then using mathematical statistical methods to analysis the status quo of selected corporate governance factors, lastly, resort method of empirical analysis through the creation of econometric models to study the impact corporate governance factors on the accounting conservatism, and finally draw conclusions and policy recommendations.This Thesis is organized as follows:Chapter 1, Introduction. the background, the purpose and the innovation point of writing this Thesis, and a brief description of the basic sections.Chapter 2, The development and research of the accounting conservatism. Mainly expounds the origins and development path of the accounting conservatism, given the definition of accounting conservatism from both normative and empirical research, and limit the related concept in this Thesis, it also introduced the value of accounting conservatism to enhance protection of the interests of stakeholders, lastly from measure models, measure methods, and existence, introduced the of measurement and the existence of the accounting conservatism.Chapter 3, Literature Review and Commentary. This chapter from a corporate governance perspective, first introduced the content and structure of corporate governance, then I reviewed domestic and foreign thesis which research the impact of corporate governance factors on the accounting conservatism, lastly I commented it and pointed out future research directions.Chapter 4, Theoretical analysis and research hypothesis. This chapter first introduces the contract theory; principal-agent theory and asymmetric information theory, and then I make theoretical analysis on this basis and proposed 7 hypotheses.Chapter 5, Research design. This chapter introduced the sample data screening and. source, test model and variables, and make simple descriptive statistics, in order to lay the foundation for the empirical test.Chapter 6, Results and analysis of the empirical test. This chapter uses the data and models to test the 7 hypotheses in multiple regressions, demonstrate or deny the original hypothesis, and analysis the results.Chapter7, Conclusion and research limitations. This chapter summarizes the research findings and put forward policy recommendations, and pointed out the research limitations and the future research direction.This has some contribution as follows:Firstly, this thesis systematic studied the impact corporate governance factors on the accounting conservatism, the Selected corporate governance factors in this paper covers all the basic major aspects of corporate governance elements, it will a clear and comprehensive understanding the impact of corporate governance on the accounting conservatism.Secondly, this thesis uses the identity type of company's ultimate control, which is collected by hand, it is different from the used literatures which use direct controlling shareholder's identity type.Thirdly, this thesis examines the impact of different levels of government ultimate control on the accounting conservatism for the first time.