Influence Of Listed Companies Accounting Conservatism On Equity Valuation

In the capital market, the market price of the enterprise and its value becomes the special issue of enterprise stakeholders’pay attention. Managers and investors pay great attention to the enterprise value evaluation as an important means of value management and value investment. Accounting conservatism as one of the basic principles of accounting, to a certain extent, affect the accounting earnings. Accounting conservatism is actually biased accounting, makes the book value of equity assets under bias. In the current complex accounting environment, accounting and the degree of uncertainty gradually increase, the financial information statements are public, but investors are not completely distinguish the changes in value that underestimation parts caused by the factors of accounting conservatism. Therefore, it is necessary to analyze the accounting conservatism that will produce what kind of impact on equity valuations, so as to give direction to managers and investors to manage enterprise. This article uses the residual income valuation model to verify the relationship between accounting conservatism and equity valuation, helping to understand the current status and trends of the equity valuation influenced by accounting conservatism, thus further give more information to the relations research of China’s accounting conservatism and equity valuation.This article is based on contract theory, information asymmetry theory and principal-agent theory, made qualitatively analysis for accounting conservatism and equity valuation, discusses the influence of accounting conservatism on equity valuation, use2003-2012data of A-share listed companies in our country as the research sample, using the residual income model (F-O model) to analyze comparatively of accounting conservatism change of listed companies through the ten years in our country, to verify the relationship between accounting conservatism and equity valuations of listed companies in China, then regress by groups, study accounting conservatism influencing on the equity valuation under different grouping. Results show that the F-O linear dynamic equation and valuation model is more and more suitable for our country’s capital market, residual income valuation model has stronger ability to explain and to predict stock price. Overall accounting conservatism exist in the listed company of our country, accounting information has the value relevance, shows that listed companies in China can get the corresponding economic benefit by providing conservatism accounting information. Assets contribution to the company’s value is not always higher than its book value, speculated that the China’s macroeconomic environment’s instability cause the accounting conservatism premium and accounting conservatism discount of different annual, when the macro economic environment is optimistic, the company will show the accounting conservatism premium, on the other hand, the company will show the accounting conservatism discount. When considering the different control nature, found that influence of the state holding listed companies accounting conservatism on equity valuation is more significant, compared with losses sample companies, profit sample company’s financial information disclosure degree of accounting conservatism were significantly positive correlation with the equity valuations, the market to a certain extent can distinguish "good news" and "bad news" companies, the "good news" companies are given higher valuations. Influence of the China’s listed companies accounting conservatism on equity valuation has industry characteristics, accounting conservatism of manufacturing, electricity, steam, hot water production and supply industry, comprehensive industry and construction industry impact on equity valuation and have significantly positive correlation. At last three aspects related Suggestions are given according to the results.