Ownership Concentration And Conservatism

Accounting conservatism is one of the characteristics of financial reporting information quality. It is also an important guarantee to provide more useful financial reports for users of financial reports. When accounting personrecognizeaccounting information in the preparation of the financial reporting using conservatism principle with considering the uncertainty of the business environment, the recognition criteria of "good news" must be more strict than the recognition criteria of "bad news", thereby inhibiting the opportunity of manipulating the management of accounting data.Existing researches on accounting conservatism mostly start from need and economic consequences. Most study about accounting conservatism is about the contract motivation of the accounting conservatism. In these studies about the contract motivation of the accounting conservatism, most is based on the perspective of the agency problem. Many existing studies show that the first class agency problem in Chinese capital market environment is not very serious, but the second category agency problem that between shareholders and minority shareholders is the focus of many studies. How does the second agency problem impact the accounting conservatism? This article provides a new perspective about the study of accounting conservatism. Iwill study the relationship between ownership concentration and accounting conservatism with listed companies.This paper uses both qualitative and quantitative analysis methods.In the theoretical deduction, the paper first discusses the accounting conservatism need motivation and analyzes the impact of accounting conservatism on firm agency costs.Then, specifically Idiscuss the influence that the second agency problem makes on accounting conservatism combined with our existing capital market characteristics. In the final this paper discussesthe relationship between ownership concentration and accounting conservatism. In the empirical research, we use the2008to2012data of listed companies processed by state from CSMAR database. In this paper, Iuse three indicators to measure the concentration of ownership. At last this paper regresses the data of listed companies to explain the relationship between ownership concentration and accounting conservatism.This article does the regressionwith the method of measurement of accounting conservatism in Mozaffar Khan and Ross L. Watts’s article in2009. Firstly Iselect the size of the company (the logarithmic of (net debt+market value of equity) from CSMAR database), the market value and book value ratio (total assets/market value fromCSMAR database) and the gearing ratio (the book value of liability/(the market value of equity+the book value of liability) from CSMAR database) from a range of different businesses feature as an estimate of the company’s accounting conservatism index to calculate the indicators of the company/year accounting conservatism-robustness index (C-Score). Secondly I regress the C-Score on the explanatory variables and control variables. In the finalIanalysis results of the regression.I also do the robust test with Basu’s model.Research ideas in this paper are:Firstly, the relevant literaturesabout accounting conservatism and ownership concentration are reviewed. Secondly, I will do theoretical deduction about the relationship between ownership concentration and accounting conservatism. Thirdly I do empirical analysis to study the relationship between ownership concentration and accounting conservatism with the data from2008to2012.Finally I put forward policy recommendations based on research conclusions.This paper includes six chapters:The first chapter is the introduction. Firstly I explain the research background and significance of this paper. Secondly I determine the research methods and ideas in this paper. At last I discuss the contribution and the lack of this paper.The second chapter is the literature review. This article reviews the researches of accounting conservatism and ownership concentration. Firstly I review the demand and economic consequences of accounting conservatism for domestic and international. Secondlyl review the current researchesabout ownership concentration.Finally Icomment on the literature reviews which lead to the focus of this study.The third chapter is related concepts and theory deduction. I define Accounting conservatism, agency theory, ownership concentration and the nature of property rights theory and analysis the relationship between ownership concentration and accounting conservatism.Chapter IV is the study design. Firstly I deduce the hypothesis of this paper based on the theoretical analysis. Then I set the model to study this relationship. In the final Iexplain variables in the model to prepare for the empirical regression.The fifth chapter of this empirical analysis divides into descriptive statistics and correlation analysis. I do the descriptive statistics on the data and analyze the results of descriptive statistics and the correlation between variables.Chapter VI of this research includes robustness testing, policy advice and research limitations and prospects. Firstly,I do the regression with the OLS method and analysis regression results. Secondly I do the robustness test with Basu’s model. Thirdly I provide a number of policy recommendations based on the research of this article. Finally I provide some contributions and limitations in this study.The contribution of this research is the following three aspects:Firstly this article analyses the relationship between ownership concentration and accounting conservatism. Previous studies on accounting conservatism are about the first class agency problem that between shareholders and managers, hardly about the second type of agency problem thatbetween major shareholders and minority shareholders. This paper enriches the research in this area.Secondly this paper study the relationship between ownership concentration and accounting conservatism with the perspective of the nature of property rights by settinga dummy variable to distinct the non-state-owned listed companies and the listed companies.Thirdly the results of this study indicate that the relationship between the ownership concentration and accounting conservatism isnegative. When other conditions are the samethe accounting conservatism of state-owned enterprises is higher than non-state-owned enterprises.Inadequacies of this paper are that the factors which affect the company’s accounting conservatism may be more. Ionly select a few variables to control it. Due to the time constraints and the ability to set the model Ifail to remove all confounding factors. And some factors that don’t taken into account may be affecting conclusion.