Nature Of Property Right&Accounting Conservatism And Non-efficient Investment

As we all known, investment activity of enterprise is one of the three key financialactivities, it affects the enterprise profitability, management risk and enterprise valuewhich determines the enterprise’s survival and development. However, in recent years,the phenomenon of over-investment or under-investment caused by the agency conflictand asymmetric information problem is widespread in our country enterprise.Over-investment will lead to the waste of enterprise’s capital which will increase businessrisk and financial risk. The enterprise will miss some good investment projects due tounderinvestment, which makes it difficult to grow and develop healthily. In a word, thesetwo kinds of inefficient investment behavior will damage the interests of shareholdersand corporate value.Accounting conservatism which is one of the important features of accountinginformation quality, through the timely loss recognition, can effectively coordinatingagency conflict between shareholders, management and creditors and help to enhance theinvestment efficiency of the company. However, in recent years, some researchers inaccounting field headed by the IASB have begun to doubt the positive role of accountingconservatism; they claim that accounting conservatism underestimates the net assets andprofitability of the enterprise, which makes the existing investors and potential investorsgive up some good projects, thus increasing the occurrence of under-investment. Thereare also different points of view about whether accounting conservatism can improve theefficiency of investment in our country. Therefore, this paper examines the role ofaccounting conservatism playing in company investment.This paper first reviews the domestic and foreign research about the corporateinvestment efficiency and accounting conservatism, and then analyzes the accountingconservatism’s impact on the efficiency of investment theoretically. This paper selectedthe A-share listed companies in Shanghai and Shenzhen from2009to2012as theresearch sample. The measurement of investment efficiency and accounting conservatismare based on residual model built by Richardson and C-Score model built by Khan andWatts (2009). And then this paper verified what influence accounting conservatism canmake to over-investment and under-investment using multiple linear regression method.The results show that accounting conservatism can effectively restrain over-investment of enterprise, and at the same time accounting conservatism will intensify under-investmentof enterprise. But from the point of property rights, the impact of accountingconservatism on investment efficiency is not obvious in state-owned listed companies.