The Influence Of Accounting Standards Change On Accounting Conservatism

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. Recent studies classify conservatism into two forms: unconditional conservatism and conditional conservatism. People have a deeper understanding about the significance of Conservatism. Watts points out that the alternative explanations are contracting, litigation, taxation and regulation. This paper only tests the influence of accounting standards change on conservatism.This article selected financial and market data of 1149 A-share companies in Chinese stock market from 2005 to 2008 as observations and adopted Accruals-Based Measures to study the influence of accounting standards change on unconditional conservatism and conditional conservatism. The findings are as follows,unconditional conservatism decreases significantly and conditional conservatism increases significantly after accounting standards change happened in 2007. There are significant differences from industry to industry. Manufacturing and extraction industries have comparatively higher conservatism changes.This paper analyses accounting standards change, unconditional conservatism and earnings management behavior of listed company. Unconditional conservatism plays a negatively interrelated role on conditional conservatism in short-term measurement. But in long-term measurement, conditional conservatism and unconditional conservatism is positively related. Earnings management behavior influences conditional conservatism to some extent. Negative earnings management behavior will increase company's conditional conservatism, and positive earnings management behavior will decrease conditional conservatism.Further, this article is to provide more empirical evidence for conditional conservatism research: conditional conservatism in china is existent, and the significant increase is induced by accounting standards change, unconditional conservatism and"take a big bath"behavior of loss firms and few profitable companies.