Research On The Effect Of Accounting Robustness On Non - Efficiency Investment

As one of the three major financial management decision, investment has a deeply influence on enterprise value. Effective investment decision can reasonable use the funds and create more value for enterprise. However, most C hinese p ublic company has an issue on efficiency of investment. This problem can lead the distribution of resources unbalanced and broke the goa l which is the maximization of shareholder wealth. From a macro point of view, the low efficiency of investment reflects the imperfections of capital market.Accounting conservatism has a centuries-old history. Meanwhile, it is also a very important criterion in financial accounting. Practitioners and theoretical circles always focus on it. However, this year’s FASB and other accounting Standard setters give a negative attitude on accounting conservatism. As a result, many accounting Standard setters reduce the use of accounting conservatism and increase the use of fair value measurements.In the beginning, we reviewed correlation studies on accounting conservatism and inefficient investment, then defined some concepts and used the principal-agent theory, information Asymmetry theory and managerial overconfidence to analyze the relationship between accounting conservatism and inefficient investment. This paper selected the Ashare companies listed on stock exchange data from 2010 to 2014, altogether 1365 companies. Richardson(2006) is used to measure the inefficiency investment and Modified Basu Model is used to measure the accounting conservatism. Then we use multiple linear regression test the relation between them and find out what should government do on inefficient investment. The regression result reveals that a ccounting conservatism can reduce the inefficiency of over- investment and increase underinvestment. Meanwhile, this paper can also give theory evidence and policy proposal on reducing inefficiency investment of enterprise.