Research Of China’s Stock Market Volatility And Accounting Conservatism

As early as1924Bliss proposed that financial information should reflect the characteristics of the accounting conservatism. Accounting conservatism cause popular academic attention, however, the U.S. Financial Accounting Standards Board in the2008financial accounting conceptual framework draft, the abolition of the practice of accounting conservatism led to the boom of accounting conservatism. China’s listed companies as the main body of the stock market, the value of the company will be affected by the fluctuations of the stock market cycle in a certain extent. Accounting policies will also be demonstrated over a period of robust features, while during another period of radical. Accounting conservatism has dynamic changing characteristics, and the current contract, corporate governance and accounting standards change several aspects of the study could not explain the above dynamic characteristics. Whether there is an existence that listed companies adjust accounting conservatism due to the volatility of the stock market, that the adjustment has an impact on basic financial investment and financing activities. Therefore, research accounting conservatism under the different cycles of the stock market, and further research on the scale of investment and financing is a question worth exploring.This article is based on the Bry and Boschan the BB split point confirmation process analysis method, combined with the financial accounting reports on an annually characteristics, the Chinese stock market is divided into the rising stock market cycle and the stock market down cycle. Using C score (CSCORE) method by Khan and Watts (2009) to calculate each company’s annual accounting conservatism.2003-2011China’s Shanghai A-share listed companies for the total sample, empirical tests of the company’s accounting conservatism under different cycles of the stock market, and further examined the impact of company accounting conservatism on the scale of investment and financing in the stock market cycle. The empirical findings:(1) Enterprises take radical and conservative accounting policy respectively under the stock market up and down cycles;(2) The scale of investment in the stock market up cycle increases with the weakening of accounting conservatism. In the stock market down cycle, the premise of the investment scale increase is the accounting conservatism enhanced.(3) In the stock market up cycle, the scale of corporate finance increased with the weakening of accounting conservatism increases. The company financing scale declines in the stock market cycle, provided that accounting conservatism enhancement.According to the conclusion of the study, two suggestions was made from within the company and outside the company:China’s listed companies should determine the investment and financing scale reasonably; enhance the needs of the users of accounting information accounting conservatism; supervision departments strengthen supervision of the quality of accounting information; accounting conservatism as a quality of accounting information equires the need for its existence. This study provides new empirical evidence for understanding the quality of accounting information.