Research On Accounting Conservatism And Investment Efficiency

As one of the oldest accounting principles, conservatism has always been a hot issuein academy field. Extant researches mainly studied the cause of accounting conservatism,its change trend and the factors influencing it, however, research about how accountingconservatism impacts company investment is rare. Early researches show thatover-investment or under-investment caused by agency problem and financial constraintsis common in China. Does accounting conservatism have a positive economicconsequence and provide a new path to control the inefficient investment?Based on the literature review of accounting conservatism and corporate investment，this article selected the data of1223A-share listed companies in Chinese stock marketfrom2007to2010as observations. The measurement of investment efficiency andaccounting conservatism are based on Richardson residual model and C-Score model.Then this thesis tests the relationship between accounting conservatism and investmentefficient. Furthermore， this thesis tests the nature of ownership importance therelationship between accounting conservatism and inefficient investment.The findings are as follows, accounting conservatism can reduce the inefficiency ofinvestment overall. On the one hand, accounting conservatism can reduce the inefficiencyof over-investment., on the other hand, it exacerbates the inefficiency of under-investmentin private companies, but overall help to reduce the inefficiency of Chinese companiesinvestment.