Accounting Conservatism And Creditor Protection

Because of the development of capital market and bond market in China is not very mature, most companies have to borrow from creditors in order to get the funds required for the production and business operation. The degree of creditor protection will directly affect the company’s indirect financing ability, the protection to creditors plays an important role in the process of transition of economic development in our country.This article explore the relationship between accounting conservatism and creditor protection from the perspective of accounting information quality can affect the decisions of the creditor. Accounting conservatism can effectively promote the sign of debt contracts, as an important indicator to measure the quality of accounting information. Given that creditor protection in our country’s legal system is not perfect, in order to protect the interests of creditors better, the enhancement of enterprise accounting information quality is undoubtedly an effective supplement of the legal channels to protect the interests of creditors.This theory basis of the article are information asymmetry theory, principal-agent theory and the theory of signal transmission. The measure of creditor protection is mainly from two aspects, the usefulness of the credit decision by using accounting information and possibility of getting new loans from the creditor in the future. Considering the phenomenon of credit soft constraints in the economic transition period in our country is exist, therefore, the article further divide all the sample into state-owned and non-state-owned group in order to consider whether there is a difference of the influence of accounting conservatism to creditor protection under different property right nature.The aim of this paper is to empirical test the role of accounting conservatism play to creditor protection, and then test this under different property rights. The paper adopts the method of theoretical analysis and empirical test. Empirical study results show that accounting conservatism will help enterprises to make correct decision on judging credit, the accounting conservatism can protect the interests of the creditors by raising the decision usefulness of the creditors. Compared to the non-state-owned listed companies, the influence of accounting conservatism on improving the credit of creditors decision is weakened in state-owned listed companies. The adoption of accounting conservatism can help the company get new loans in future years, and the effect is also weakened in State-owned companies. Compared with the state-owned listed companies, the accounting conservatism can achieve higher creditor protection in private listed companies.Accounting conservatism is not only the result of the accounting policy choice, it is also affected by a nation’s laws, regulatory environment, corporate governance and other supporting systems. So we need to complete the laws and regulations of the creditor protection and strengthen the construction of financial regulatory environment in order to achieve better creditor protection of accounting conservatism and promote the prosperity and development of the market economy in our country.In order to promote the function of accounting conservatism to protect creditors, we also need to take the legal environment, regulatory environment, corporate governance mechanism and other relation factors into consideration. The deficiency of this paper is mainly manifested in the absence of accurate classification of different creditor types, this paper only consider the single structure of the creditor of China, and set all creditors to banks. This paper adopts a commonly used method to calculate accounting conservatism, credit decision usefulness and new loans possibility, but this lead to the following robustness testing is inadequate.