Study On The Relationship Between The Accounting Conservatism And The Cost Of Debt In Listed Companies

Accounting conservatism is a basic principle in accounting theory and practice, it has aprofound historical background and has deep impact to the accounting practices of manycountries. At present, research on accounting conservatism internationally includes fouraspects: the existence of conservatism, accounting conservatism and corporate governance,the measurement method of conservatism, and the economic result of conservatism. Ourresearch on accounting conservatism is more and more increasingly wide range, butrelatively little research on the economic consequences of accounting conservatism.The international financial crisis triggered by the U.S. subprime mortgage crisisaccounting issues referred to unprecedented heights, while the accounting conservatismperformance timely confirmation and full disclosure of the risks and losses. For debtinvestments, the accounting conservatism performance effectively guard against moralhazard after the signing of the debt covenants to protect debt investors, investment income,before the leases were signed, robust accounting information can prevent creditors fromadverse selection, so accounting conservatism plays an important role in the protection ofthe interests of investors, debt investors. Accounting conservatism is how it affects the costof debt? For the creditors, they are most concerned about the profitability of the enterpriseand principal capacity, corporate profits and net assets is to the creditor focus on accountingindicators. Enterprises to choose which accounting policies, accounting soundness willdirectly affect the accounting indicators. Relatively prudent accounting policies, to someextent, to ensure that managers are not overstated profits and assets, reducing the risk ofdefault of the company’s creditors loans can safely recover. Accounting conservatism as aconflict of interest of the shareholders and creditors of the coordination of the company, toensure the contract effective implementation and can significantly reduce the contractualparties under Asymmetric Information about moral hazard and adverse selection.In this paper, the related concepts of accounting conservatism recalled to sort out theexisting literature to explore the theoretical basis of the accounting conservatism and thecost of debt financing, selection of Shanghai and Shenzhen A-share listed companies in2001-2011as the study sample on accounting the robustness and debt financing costsrelated to the relationship between the empirical analysis.(Distribution of dividends, profitsor payment of cash interest expense-year dividend payout number)/short-term borrowingsand long-term loans as well as due to bond three ratio as substitute variables for the currentyear the debt financing, the market value of equity-book value ratio and two calculationmethods of non-operating accruals as alternative accounting conservatism variables and selected asset-liability ratio of asset-liability ratio, firm size, profitability, enterprisedevelopment capacity as control variables, the use of regression analysis to study therelationship between accounting conservatism on debt financing, the study results show that:Accounting conservatism, lower costs of debt.