The Empirical Relationship Between Debt Contracts And Accounting Conservatism

At present, the global financial crisis which is caused by the U.S. subprime mortgage is still affecting the economy. The origin of the crisis is that the banks did not fully evaluate the loan risks. This is an Alarm to Chinese capital market. With the development of national strength, the risk caused by the global capital market is increasing in China. How to prevent the risk in the signing of debt contract for the creditors and debtors, how to make better use of accounting information to guard against the risk is that we should consider strongly.The existence of debt contract makes the demand for the conservative accounting information. The accounting conservatism is important to lowering the debt contract cost and reducing the interests between creditors and shareholders. In the debt contract, the conservative accounting information can bring the before and after benefits for the lenders and borrowers and improve the efficiency of the capital market. The research is little which focus on the effecting factors to conservatism from the perspective of debt contract. This article is mainly about how the amount and maturity of debt affects the conservatism from the perspective of debt contract binding factors. At the same time, the relationship is empirical studied in the special institutional background of China. How the long-term debt ratio of state-owned enterprises and the short-term loan proportion of private enterprises impacts the accounting conservatism is analyzed.In this paper, we use the qualitative and quantitative analysis method and study the data of 2007-2009 A-share listed companies. We analyze the relationship between accounting conservatism and debt contract binding factors. Empirical result shows: the overall level of debt has significant accounting impact to the accounting conservatism. The accounting information shows higher accounting conservatism while the debt proportion is higher. The various maturities of bank borrowings have different impact to the conservatism. The higher the proportion of short-term loans, the accounting conservatism is stronger. The higher proportion of long-term borrowing, the accounting conservatism is worse. Combined with the special background of China, the state-owned holding undermines the accounting conservatism. The private enterprise with a high proportion of short-term loans shows higher accounting conservatism while the state-owned enterprise with a high long-term proportion shows lower accounting conservatism.