The Empirical Study On The Influence Of The New Accounting Standards On Earnings Conservatism

After the late 1980s, as the accounting objective changed from "accountability" to "decision usefulness", it's becoming more and more important to improve the quality of financial report. In china, the accounting rules reform has been lasted for decades, and its goals are mainly about enhancing accounting information quality. More and more scholars started to pay attention to and do empirical studies on the influences of the accounting reform on the accounting information quality since 21st century. Earnings conservatism is an important indicator of accounting information quality. The uncertainty and risks of business environment are the reason that earnings conservatism exists, thus, the research on earnings conservatism in high-technology sector becomes a great perspective for the risks of technology sector are extremely high, considering other industries.Based on that, my sample is designed as high-technology-based samples. The paper set electronics industry, medicine, biological products industry, air transport industry and IT industry to be the high-technology sector. They consist of observations from 2004 to 2009 in the CSMAR database. The paper uses Ball (2005) model to test whether the earnings conservatism in Chinese high-technology sector exists and the changes of earnings conservatism in Chinese high-technology sector since the new accounting standards of 2006. The paper also makes a brief analysis of the source of earnings conservatism in Chinese high-technology sector.The results in this paper are:(1) for the period of 2004-2009, the earnings conservatism in Chinese high-tech sector does exist, and the high-tech sector is characterized of higher earnings conservatism than non-high-tech sector. (2) The earnings conservatism in Chinese high-tech sector is lower in the period of 2007-2009 than in the period of 2004-2006, and the difference is statistically significant. (3) for the period of 2007-2009, controlling the loss firms in the high-tech sector, the profit firms do not show earnings conservatism, thus we assume that the earnings conservatism in Chinese high-tech sector in 2007-2009 is mainly because the "big bath" etc. earnings management behaviors.The results of the above research show that, the accounting standards do affect the Chinese high-tech firms'earnings conservatism, but without the demand for conservative accounting information and a strong legal and enforcement mechanisms, the rules will lead to more earnings management behaviors.In summary, earnings conservatism do exist in Chinese high-technology sector during the period of 2004-2009; and the high-technology firms'earnings conservatism is brought mainly by the earnings management behaviors of loss firms. Future research could focus on the influence of the R&D standard on the earnings conservatism of high-technology sector.