Economic Boom, Accounting Conservatism And Investor Protection

Accounting conservatism is defined in the face of uncertain economic business treatment to maintain a cautious attitude. As one of the important characteristics of financial reporting, accounting conservatism has a long history and has important economic consequences. As a participant in the capital market,the protection of the interests of investors is directly related to the healthy and stable development of China’s capital market. And the degree of economic prosperity will also affect the degree of accounting conservatism. So, under different economic boom conditions, how to protect the investor’s accounting conservatism?This paper selects 2010-2014 China make financial data of A-share listed companies as the research sample,from accounting conservatism can improve the quality of accounting information perspective examines the protective effects of accounting conservatism to investors. Specifically,this paper measures the size of the accounting conservatism of Listed Companies in our country; secondly, by testing the relationship between economic and accounting conservatism; thirdly, testing the correlation between accounting conservatism and earnings management between the two. Finally, testing the influence of accounting conservatism on the value relevance of earnings.The conclusions of this study are the following: In general, accounting conservatism in China’s capital market is widespread; economic boom and robustness levels were positively correlated, that is,the more economic prosperity and stronger robustness of financial reports of listed companies; accounting conservatism and earnings management has significant negative correlation, robust accounting policy can reduce the extent of earnings management;the use of accounting conservatism and earnings value relevance was positively correlated,i.e. the conservatism principle to improve the value relevance of earnings. To through the results of this study, combined with China’s specific national conditions, it is recommended to develop and modify our listed company’s financial processing and accounting standards apply conservatism principle, in addition, to assess and evaluate the soundness of the principles of corporate investment when you want to protect the utility and the current economic situation in which the combination of those.