Research On The Influence Of Accounting Conservatism On Financial Constraints

Conservatism, as a significant principle for confirmation and measurement, has been lasting long enough to guide accounting practice. However, in March 2010, IASB and FASB published “The Conceptual Framework for Financial Reporting”(Exposure Draft), which emphasized qualitative characteristics of useful financial information and abolished the principle of accounting conservatism. With the developing of economic globalization, capital flowing on a global scale, our country is gradually accelerating the pace of international convergence of accounting standards in order to enhance the comparability of corporate financial reporting. The ministry of finance revised the accounting standard for business enterprises in 2014. The basic principle of new fair value was added. It further weakened the position of accounting conservatism and reflected accounting objective of decision-making utility perspective.Many scholars at home and abroad made lots of research on the economic consequences of accounting conservatism, but the conclusions are not unified. Chinese scholars’ study found: accounting conservatism plays a positive role in improving the efficiency of financing, investment efficiency, reduces the cost of capital. However, excessive conservatism can cause imbanlance comfirmation of revenues and expenses and distort the authenticity of accounting information, reducing value relevance of accounting information. But there is very little academic research about it. Therefore, it is significant to study on the effect of accounting conservatism of financing constraints and the sustainability of this impact.Firstly, in this paper, Basu model and K-W model are used to make regression of all samples and control samples of loss-making companies. It verified the existence of accounting conservatism of listed companies in our country. Secondly, The degree of financing constraints in listing company was measured by using Logistic model to build the financing constraints index. C-score model and MB index were used to measure conditional conservatism and unconditional conservatism. Conditional conservatism and unconditional conservatism were made regression with financing constraints index to test the causal relationship between accounting conservatism and financing constraints. The results show that accounting conservatism can ease the degree of the company’s financing constraints. Finally, conditional conservatism and unconditional conservatism were grouped by quartiles. The sustainability of accounting conservatism to the impact of financing constraints was verified by grouping regression test. The study found that: the improvement of conservatism can greatly relieve the degree of financing constraints at the time of the lower level of accounting conservatism, but with higher conservatism to some degree, if conservatism levels continue to rise, it would reduce the remission of financing constraints. Therefore, disclosure of financial information should make a choice between the value relevance and conservatism, and balance the benefits and costs of accounting conservatism to seek the best level of conservatism.