Conservatism And Investment Efficiency

Conservatism is an important characteristic of accounting information, and investment efficiency is always being the focus of the practice and theory fields. The impact of conservatism on investment efficiency is also a hot spot of accounting research in these years. Especially, the researches based on categorization of generation mechanisms of conservatism are burgeoning. While there is not yet been a same conclusion about the different impact on the investment efficiency of two types of conservatism, which means conditional conservatism and unconditional conservatism.This article adopts different measurements of two types of conservatism which based on that categorization, and the expected investment models of Richardson for over-investment and under-investment. It will make the study on the respective impact of the two types of conservatism on the two types of inefficient investment. In addition to these, it will take the corporate governance and financing restriction into the study.The conclusion indicate that conditional conservatism can improve investment efficiency with curbing over-investment and alleviate under-investment significantly, while unconditional conservatism can only curb over-investment insignificantly, and instead aggravating under-investment. In this way, conditional conservatism is better than unconditional conservatism in the aspect of economic consequences.With the variables of corporate governance in the study, the conclusion shows that management shareholding can not only promote the inhibition of conditional conservatism on over-investment but also the alleviating of conditional conservatism on under-investment significantly. While equity diversification will also promote the inhibition significantly but the alleviating not significantly. This conclusion remains with the serialization of the equity diversification variable.Then with the financing restriction in the study, the alleviating of conditional conservatism on under-investment will be enhanced. Besides, this article will use the equity nature as a proxy variable of financing restriction, the conclusion is consistent with the one former, with low financing restriction in the state-owned companies.In the end, this article will make some proposals for company management, the makers of accounting policy and the regulators of capital market, basing on those conclusions of all empirical researches.