Monetary Policy, Accounting Conservatism And Investment Efficiency

China’s economic development over the past decade has achieved great success,particularly in the accession to the World Trade Organization13years ago in2001，which has helped to connect China and the world economy more closely. And with thedeepening of reforming and opening up，China’s market trend is growing and becomingmore market-oriented and better. Therefore, under the new economic conditions，government departments and other policy makers will face the challenge of maintaininga stable，rapid economic development of the country．Also，as recipient of policies，companies and enterprises will be trying their best to survive and develop.Such background gives researchers enough reason to study how macroeconomicpolicies transfer to specific enterprises，and how enterprises deal with the change ofmacroeconomic policies，and in which way the policies effect the output of specificenterprise. On the other side， how the sum of the enterprise output change the strategyof the policy makers. The main body of this paper is under the research framework as“Study of Macroeconomic Policy-Enterprises Behavior-Enterprise Output-Macroeconomic Policy”. This paper attempts to expand research from a specific angleof the former framework and try to make contribution as possible to the field ofconnecting the macroeconomic study and corporate financial study.Specifically, in the part of the macroeconomic policy I will major focus on thetightening monetary policy，in the enterprise behavior part the corporate accountingconservatism changes will be majorly concerned，as for the output of corporate part thecorporate business investment efficiency is what will be studied. This article selected asample from the A-share listed companies in Shanghai and Shenzhen stock exchangingmarket in the years from2004to2009. And the sample will be divided into two groupsas monetary tightening group and monetary easing group to discuss the changes ofaccounting conservatism in these companies.On measuring the corporate accounting conservatism，this paper draw the Basumodel which studies the relationship between earnings and stock returns. The indicatorcalled “accounting conservatism index”(C_Score) will be adopted. The results ofdescriptive statistics of the index on both groups shows that in the period of monetarytightening the accounting conservatism of corporate improve significantly. Further more，taking the differences of property right of enterprises into consideration，I found that in the same monetary tightening period both state-owned corporate and non state-ownedcorporate are motivated to improve the accounting conservatism. Meanwhile the nonstate-owned corporate improve the accounting conservatism more significantly than thestate-owned ones.In the part of measuring the investment efficiency，this paper improves the modelby Biddle and take the “accounting conservatism index” into the model. Also，I usethe Richardson’s modest investment model along with the improved Biddle model tomeasure whether the accounting conservatism of corporate will affect the investmentefficiency and to what degree. The results of the study illustrate that the accountingconservatism is just like a “two-edged sword”：higher accounting conservatism willlower the over investment of corporate, but it exacerbates the insufficient investment ofcorporate at the same time.This study found that in monetary tightening period，enterprises adjust theirinvestment efficiency by changing the level of accounting conservatism，so theaccounting conservatism actually acts as a transmission channel in this process. Theresult of this paper is a supplement to the framework of “Study of MacroeconomicPolicy-Enterprises Behavior-Enterprise Output-Macroeconomic Policy” and it is ofcertain inspiration of this field.