The Empirical Study On The Impart Of Corporate Governance And Debt Contracts On Accounting Conservatism

Accounting conservatism is an important character of accounting information quality, which requires a higher verifiability when accountant confirms the accounting incomes, as well as a more rapid response of the accounting earnings to “bad news” than “good news”. Since the 1990 s, most scholars have focused their research on verifying the existence of accounting conservatism and its method of calculation, which has led to numerous researches on the determining factors and economic consequences of accounting conservatism. At the beginning of the 21 st century, Chinese scholars began to launch research projects on accounting conservatism, and gradually gained progress in the course of accounting conservatism over a decade, which lays a solid foundation for this research. If the external stakeholders could not gain knowledge of the accounting conservatism level of the enterprise before making relevant decisions, they could only rely on the information of the financial statements, which therefore might negatively influence the accuracy of their judgement. However, accounting conservatism is not an index that could be immediately observed. If there is a certain correlation between accounting conservatism and corporate governance and debt contract, then from the aspect of corporate governance and debt contract, accounting conservatism of the enterprise could be analysed, which benefits the external stakeholders in decision making. Therefore, the pertinence of corporate governance, debt contract of the enterprise to accounting conservatism is a problem worth further research.The thesis employs C-Score, proposed by Khan and Watts(2007) to estimate accounting conservatism level of the enterprise as dependent variable. First on corporate governance, we select independent variables from the aspects of ownership structure、board characteristics、management incentive and supervisory board, and explore the influence on accounting conservatism of each independent variable in Shenzhen and Shanghai stock exchange from 2009 to 2013, utilising multiple linear regression analysis. The result shows a tendency of positive correlation between independent director proportion of the board and accounting conservatism. The ratio of the largest shareholding, shareholding ratio of management and supervisory board scale has a negative relationship to accounting conservatism. The difference among various industries were then considered, with the descriptive statistics of accounting conservatism in agriculture, forestry, animal husbandry and fishery, manufacturing, wholesale and retail industry, building industry, as well as a comparison among the industries in the influence of corporate governance on accounting conservatism. Secondly, the research explores the influence of debt contract on accounting conservatism, and the result shows that the enterprises with a higher amount of debt tend to higher accounting conservatism, while the enterprises with a higher maturity of debt, tend to have a lower level of accounting conservatism. In addition, according to property rights of the enterprises, we analysed for enterprises with different property rights the impact of debt contract on accounting conservatism. The result shows that state-owned enterprises will impair accounting conservatism, while private enterprises with a high rate of short-term loans tend to have a more steady accounting conservatism, and state own enterprises with a high rate of long-term loans tend to have a lower level of accounting conservatism.