The Research Of Accounting Conservatism And Corporate Finance Efficiency

The accounting conservatism is one of the important characteristics of traditional accounting information quality, there is a wide-ranging impact in the accounting practices during the operation since the emergence of accounting conservatism, and many businesses adhere to this accounting policy. In most of the countries in the world, accounting principles including the conservatism requirements, however, as the accounting target shift from fiduciary duties to the decision-usefulness view, all authoritative accounting standard-setting agency stressed the fair value measurement model, weakening accounting conservatism. There is a close relationship between accounting conservatism and the efficiency of corporate finance, we are going to examine the impact of accounting conservatism to the corporate finance efficiency from the point of view that the return on investment into the capital. Prudent accounting policies play a restrictive role of corporate non-efficient invest behavior, there are two non-invest behavior in enterprises:over investment and inadequate investment. Over investment means that managers invest in the project on the net present value is less than zero in order to pursue personal interests, inadequate investment means managers give up the net present value is greater than zero investment to avoid failure. In over investment situation, accounting conservatism helps mitigate information asymmetry, thereby reducing agency costs and improve investment efficiency. In inadequate investment situation, accounting conservatism reducing the information asymmetry between the funds provider and users, thus affecting the enterprise funds obtained to improve the efficiency of investment, but also may lead to underestimation of the accounting data, so managers got overly cautious for investment, and deteriorate the underinvestment. This research base on the review and sum up of accounting conservatism and financing efficiency literature, and empirical analysis of accounting conservatism and corporate finance efficiency relationship, trying to enrich the economic consequences of accounting conservatism and developed for China so as to offer a few suggestions to China Accounting Standards agencies.This article examine accounting conservatism’s impact on the efficiency of corporate finance, from the point of view that the return on investment into the capital investment, focus on accounting conservatism restraining effect to the corporate non-efficiency. In this study, the selected sample is China’s2008-2011Listed Manufacturing Companies, use the negative cumulative accrual measurement method to measure the accounting conservative, and defined the financing efficiency into the capital to invest in businesses can use to obtain a return efficiency. The thesis adopted the negative cumulative accrued metering calculated manufacturing listed companies accounting conservatism indicators of2008-2011, and use the Richardson model to divide the business investment into a reasonable investment and non-efficient investments, after that, non-investment efficiency is further divided into over investment and inadequate investment, than analysis the impact of accounting conservatism to financing efficiency in two difficult situations:over investment and inadequate investment. The empirical results indicate that the listed companies of China’s manufacturing industry, inadequate investment phenomenon is significantly more than the phenomenon of over investment, but to the severity, over investment is far greater than the damage caused by inadequate investment. Studies have shown that accounting conservatism is widespread in China’s manufacturing industry, and accounting conservatism can effectively suppress the phenomenon of over investment, thereby reducing the degree of non efficiency investments, improve the efficiency of corporate finance, however, the impact of accounting conservatism to the efficiency of corporate finance is not significant. Finally, on the basis of the above conclusions, we suggest some policy recommendations for the rational use in our country, this article argues that enterprises should use of accounting conservatism policy combined with the actual situation, at the same time, China’s accounting standards setting agencies should balance accounting conservatism and fair value measurement model, developing accounting standards by considering China’s specific national conditions.