The Empirical Study Of Accounting Conservatism And Agency ProblemManagers And

Accounting conservatism, as a governance mechanism, requires companies should report the loss as soon as possible, while the earnings report delay. Accounting conservatism can reduce the asymmetric information between the principal and agent, encourage enterprises to recognize unrealized loss more timely than the unrealized profit, to limit the agent recognized unrealized gains and reduce the bias of financial report and improve the reliability of financial report. In other words, a relatively high degree of accounting conservatism, the self-serving behavior of managers or major shareholders will be found easily. The investors and creditors will take action to inhibit the controlling shareholders'tunneling behavior and perks of manager. So accounting conservatism will reduce the company's agency costs and increase the value of company.However, do the perks of managers and the tunneling behavior of the controlling shareholders affect the accounting conservatism?We investigate the impact of perks of managers and controlling shareholders' behavior on accounting conservatism. Based on a total of 2841 samples obtained over the three-year period between 2007 and 2009.We comprehensively use the methods created by Ball and Shivakumar (2005),Khan and Watts(2009) and Gassen et al (2006) to measure financial reporting conservatism. The empirical results indicate that the perks of managers and tunneling behavior significantly decrease the accounting conservatism. The proportion of control right of ultimate shareholders has a significantly negative relation with accounting conservatism. We also find that the check-and-balance ability of the second to the fifth largest shareholders can positively affect the conservatism of financial report.This paper provides the evidence of the effect of perks of managers and controlling shareholders' behavior on financial reporting conservatism. The article broadens not only the field of agency problems, but also regulates the accounting conservatism of the listed companies.