Analysis Of How The Accounting Earnings Under The New CAS Influence The Creditors’ Decision-making

On February15,2006, the Ministry of Finance issued the new enterprise accounting standards system, which was required to be implemented in all the Chinese listed companies since2007. To improve the quality of accounting information and maintain social and economic order, the new accounting standards is more strict in regulating the accounting information generation and disclosure, effective in strengthening constraints on information supply, protecting investors’"right to know" and promoting the public to make rational decisions. The new accounting standards also changes a lot in regulations about preparing consolidated financial statements and parent company financial statements than the previous one, it emphasizes on the entity rather than only the parent company in preparing the consolidated financial statements in consideration that the consolidated financial statements reflect the enterprise group’s surplus situation while the parent company’s financial statements only reflect its own business and investment performance. The parent company has to take the cost method instead of the equity method in measuring the long-term equity investment in its subsidiary companies, and switches to the equity method in preparing the consolidated financial statements.Financial report is the major source for the creditors to gain the enterprise information for credit decision-making. Information demanded diffesgn-ifycantly between creditors and shareholders. The consolidated financial statement can provide more useful information to the shareholders of the parent company than the parent company’s financial statement, but not to creditors. The adjustment of specific items in the new accounting standards may lead to a change in the surplus information and have an impact on the creditors in credit decision-making, whether the creditors will gain more accounting information, the information asymmetry between the enterprise and the creditors will be alleviated since the new accounting standards have been implemented? To answer the above questions, we do this study from the following two perspectives:1.Compare the system arrangement and its influence between the new accounting standards and the previous one;2.evaluate the usefulness of accounting surplus information in credit decision-making.By using the parent companies’financial reports between2005-2008as research sample, we have tested whether the usefulness of accounting surplus information on creditors’decision-making has changed under the new accounting standards, and inspected whether earnings difference under consolidated financial statements and parent company reports will offer incremental information to creditors, which kind of reports the creditors will rely on to make their credit decision. This paper is organized as follows:section1, introduction, provides the background and the structure of this paper. literature review, presents the prior research. Section2, the theoretical analysis. Section3, research design, discuss the research design. Section4, Empirical research, presents the empirical results. Section5, research conclusions, political recommendations and research limitations, provides a summary of the study, some political proposal and analysis of the limitation of this study.We got the following conclusions:1.The consolidated financial statement provides more information to creditors for credit decision-making than parent company’s financial reports.2. The earnings difference between the consolidated financial statements and parent company’s financial statements increases since the new accounting standards was implemented and could be incrementally informative to creditors.This paper contributes to the literature in the following perspectives:1.we evaluated the implementation effect of the new accounting standards from the creditors’point other than the shareholders.2. To get more convincing conclusions, we divided the research sample into two subsamples "performance rise" and "performance drop" to investigate creditors’reaction to "good news" and "bad news".3. To be more comprehensive in investigation, we adopted more than one index to measure the usefulness of earnings information on creditors’ decision-making, such as debt amount, debt financing cost rate, debt maturity structure.However, because of the lack of subjective knowledge and objective constraints, there are still many shortcomings:(1) the research sample was kind of small, Due to the banking system to affect the creditor’s decision-making mechanism. To this end the sample through a longer period may be able to get more reliable conclusions.(2) empirical measurement methods are not enough fine. Metrology and Inspection of the data is more the lack of does not take into account heteroscedasticity, autoregressive and within nature and so on if the problem persists. Hope that subsequent research can improve on.