Research On Accounting Conservatism, Managerial Overconfidence And Corporate Debt Financing

Debt financing as an important way of financing, is a hotspot in the study of financial theory. The traditional financial theory explores the characteristics of the enterprise itself(such as enterprise scale, growth, etc.) or other external factors on the impact of debt financing. But with the deepening of the theory and practice, the study of corporate debt financing behavior starts to develop to behavior financial theory, which means to study the influence of human factors on corporate debt financing. Management is the enterprise financing decision makers, and their most prominent psychological traits is overconfidence. The characteristics of imperfect information disclosure and external supervision, the company governance mechanism is not sound in China is also easy to cause managers overestimate their own abilities and make irrational decisions. Accounting information is one of the ways to supervise the management, and accounting conservatism is an important index to measure the quality of accounting information, and it can play a role of governance. Therefore, combing with the accounting conservatism to study deviation of debt financing caused by overconfident management, to explore the importance of the quality of accounting information and degree of the role played by accounting conservatism in governance is of great significance.In this paper, we reviewed the domestic and foreign literature on accounting conservatism, managerial overconfidence and debt financing, and on the basis of information asymmetry, agency problems, behavioral finance theory, signaling theory and other theories we put forward related research hypotheses. Using a sample of listed companies between 2006 and 2013, on the basis of distinction of the nature of the property, we tested the relationship among accounting conservatism, managerial overconfidence and debt financing. The empirical analysis of this article mainly divides into three parts: First of all, we use managerial earnings forecast deviation to measure managerial overconfidence, and examined the impact of the managerial overconfidence on corporate debt levels and the debt maturity;Secondly, with the KW index to measure the accounting conservatism,we examined whether accounting conservatism affects the relationship between managerial overconfidence and corporate debt financing.; Finally, further examine the relationship between managerial overconfidence and the main way of debt financing to discusses what kind of debt financing way the overconfident managers tend to use to raise funds for the enterprise.The study found that:(1) Managerial overconfidence and total liabilities are related;(2) In terms of debt maturity, managerial overconfidence and short-term debt are related, and it is not associated with long-term debt;(3) Accounting conservatism promoted the positive relationship between managerial overconfidence and debt financing;(4) In non-state-owned enterprises, accounting conservatism promoted the relations between managerial overconfidence and corporate debt financing, in state-owned enterprises, accounting conservatism inhibits the relations between managerial overconfidence and corporate debt financing;(5) Overconfidence management mainly use bank debt for corporate finance, and commercial credit and corporate bonds have no significant differences. Compared with the state-owned enterprises, overconfident management in non-state-owned enterprises tend to use bank loan for financing.The resulting revelation is, market regulation should focus on the management’s own characteristics, and to take appropriate supervision; Creditors and investors can focus on the accounting conservatism of state-owned enterprises, and make accounting conservatism to play the role of governance; Creditors cannot rely too much on accounting conservatism in non-state enterprises, otherwise it may increase the deviation of debt financing made by overconfident management.