The Impact Of Ownership Structure On Accounting Conservatism Evidence From The Majority Shareholder Tunneling The Listed Companies

With the rapid development of Chinese national economy, the listed companies have to deal with more and more competitions and challenges. Facing with the pressure in the market economy, in order to keep their position of the capital market, the company may be more likely to violate the principle of the market economy. They are likely to take radical accounting procedures to manage the accounting earnings, which would harm the quality of accounting information.In recent years, a large number of accounting fraud cases and financial scandals emerge frequently. This phenomenon also proved the above judgments. Why there’s big difference in the quality of disclosed financial reporting based on the same accounting system? One reason is that the listed companies did not pay much attention on the principles of accounting conservatism when they select accounting policies and process the accounting information. So, it made the companies disclose radical financial information. When the risks and uncertainties appear, they could not make a timely response.With the in-depth development of the market economy, investors pay more attention on the quality of accounting information and require higher quality of it for their own interest purpose. As an important indicator to measure the quality of accounting information, accounting conservatism has gradually attracted much theorists’attention as well.Although foreign experts and scholars have made an extensive and in-depth study on the principle of conservatism, and obtained a series of achievements. In china, the capital market is not perfect. The protection measures for investors are at a low level. The differences in different districts in the market-oriented process are significant. China’s economic system and institutional environment are significantly differing from foreign countries. Therefore, we should do some further research on accounting conservatism based on China’s institutional context.Although a lot of literatures have already confirmed that the controls of accounting system enhanced the degree of accounting information conservatism. With the further deepening of research, scholars have found that accounting standards are not the fundamental determinants of the quality of accounting information. Accounting conservatism is not only influenced by factors such as the tax system, the securities regulatory system, but also by many mechanisms of corporate governance, including the ownership structure, board characteristics, and management powers. With such many microscopic governance influencing factors, the ownership structure is the basis of the corporate governance mechanism. Specific ownership structure and control structure determines the position and status of corporate stakeholders in the accounting information supplied game, which directly affects the result of the game (the level of accounting information quality). So, the shareholders who occupy the information dominance, especially the controlling shareholders may use their own strengths to control accounting information systems, and result their favorable accounting information to meet their own economic interests demand.The conservatism of accounting information is an important means for shareholders’oversight of the managers, and protection their own interests. But, if corporate governance structure is defective, and there exist a higher proportion of large shareholders, controlling shareholders may cover their true performance, strengthen their controlling right and grab their private benefits. How the ownership structures affect the accounting conservatism of Chinese listed companies? What effect does it bring? This research will give answers to these questions.We divided this study into five parts:The chapter of Introduction gives a description for the research background and significance, elaborates research framework and research contents, and also explains the contribution of this article.The chapter of Literature Review comprehensively and detailed reviews the existing research about ownership structure and accounting conservatism at home and abroad. The studies include two aspects, one of the aspects is determining the ownership structure and accounting conservatism concept, the other is literature combing. Then, for the above analysis, a simple commentary is carried out at the end of the chapter. According to the analysis, we finalized the dependent variable, the independent variables, and a set of control variables.The chapter of Theoretical Analysis elaborated the controlling shareholder and minority shareholders’ interests conflict based on Principal-agent problem and information asymmetry problem, and also explained how the ownership structure affect accounting conservatism. It provided a theoretical basis for the full text;Empirical Analyze chapter firstly selects and defines the variables, putting forward the research design according to the above theory analysis, and then build a multiple linear regression model to do empirical analysis for ownership structure and accounting conservatism.Research Conclusions and Suggestions chapter summarized the results of the above analysis. It showed that the three hypotheses have been verified. According to the result, we put forward some corresponding measures. For example, to optimize the ownership structure, improve the legal system and social supervision mechanism and so on.This paper’s innovations are mainly as following:Firstly, from large shareholders hollowing out the listed company’s perspective, we analyzed how the special ownership structure bring effect on the accounting conservatism, which really rich the study of accounting conservatism. Since most of the literatures gave explanation to the relationship between large shareholders’ hollowing out action and corporate governance mechanisms, corporate value, there’s little literature focus on the influence on accounting principles. Therefore, the analysis of how the ownership structure influence accounting conservatism really can rich the existing accounting conservatism research literatures.Secondly, this paper analyzed different Character of Propriety Rights’impact on accounting conservatism, which helps us deeply understand how the state-owned shares positively affect the corporate governance structure.Thirdly, this paper provided an empirical evidence for controlling shareholders may hide their hollowing out behaviors and damage the accounting information quality. Controlling shareholders often take various means of earnings management to invade and occupy more of the interests in listed companies. The conservatism principle of accounting information may lead to systematically underestimated on listed companies’net assets and income. So, taking aggressive accounting method allows the company to achieve its equity financing and debt financing requirements. At the same time, controlling shareholders still have the tendency delaying the disclosure of bad news and confirm the good news in advance, for the purpose of hiding occupying behavior and hollowing out motivation.This paper’s inadequacies are mainly as follows:First of all, this study only aimed at three years data, which undoubtedly made the number of samples small and made the time span short. This might lead to the conclusions not matching with the expected conclusions. What’s more, we only selected the listed companies from A-share of Shanghai Stock Exchange and Shenzhen Stock Exchange, excluding other listed companies. This may also affect the samples’ universality and applicability. We advise to select samples including a boarder size and a longer time span for future study.Second, Basu (1997) asymmetric timeliness measure, as a most widely used conservatism measurement methods, derived from well-developed capital markets, which highly requires the effectiveness of the market. While China’s securities market has not yet reached the effectiveness of the U.S. securities markets, therefore the use of this model may lead certain of bias to this study. Up till now, there’s not a completely effective accounting conservatism measure method, therefore, if we can further improve and perfect the method of measure accounting conservatism, there will be more contribution to the research.Finally, in terms of the variable selection, we selected only the percentage of the largest shareholders, balance of ownership and identity of largest shareholder as the main variables, which may not be able to fully reflect the impact of the ownership structure on the accounting conservatism.What’s more,different proportion of state-owned equity will bring different impact the accounting conservatism. We did not give a further explanation on the different impact to accounting conservatism.