The Impact Of Institutional Environment,Managers’ Power And Accounting Conservatism

The global financial crisis broke out in 2008,the Lehman Brothers which had used the Fair Value measurement because of early recognition of income and inflated assets,ultimately embarked on the road of bankruptcy.On the contrary,the Yangshi Group which insists on the prudent accounting policies made a cautious decision at the beginning of financial crisis.The company did not over-invest and blindly confirmed earnings,withstood the baptism of the financial crisis,became a giant in advertising industry.This shows that accounting conservatism for the company’s long-term development has played a role that can not be ignored.In this context,the research on the root of conservatism and the influencing factors of accounting conservatism have attracted more and more attention.In-depth understanding of the factors that affect the accounting conservatism will improve corporate governance and promote the development of capital markets.Among the many factors that affect the accounting conservatism,management power is one of the most important factors that can not be neglected.In the framework of corporate governance,due to the existence of the first type of agency problems,managers has the incentive and the opportunity to use the power to influence the company’s financial information and achieve self-serving.This behavior will affact the accounting conservatism.In addition to the impact of micro-level management power,the robustness of accounting reports is largely based on unsound institutional arrangements,the better the institutional environment,the stronger of the legal system for the company’s deterrence and managers’ behavior.The higher the level of protection for investors,the more robust accounting is needed.In China’s actual conditions,the state-owned enterprises and private enterprises vary widely in the two types of business camp,the performance of accounting conservatism is worth exploring.Above all,we use the method of theoretical analysis and empirical research to carry on the follow-up research.In the theoretical analysis,we review the domestic and foreign research results from three aspects:accounting conservatism,management power and institutional environment.After combing the literature,we summarizes the economic hypothesis,information asymmetry theory and principal-agent theory.Under the guidance of these theories,the mechanism of the relationship between institutional environment,management power and accounting conservatism is deeply analyzed,and two main hypotheses are put forward,namely,the negative correlation of managers’power to accounting conservatism and the influence of institutional environment on managers’ power affecting accounting conservatism has a positive effect.At the same time,combined with China’s special background,study the impact between different property rights system is the same or not.In the empirical study,we use the principal component analysis to construct the comprehensive index of managers’ power,and make some conclusions.(1)The greater the power of manager,the worse the accounting conservatism,and in the state-owned enterprises,the performance is more obvious.(2)Institutional environment has a positive effect on the influence of managers’ power on accounting conservatism,and it is more obvious in state-owned enterprises.Finally,on the basis of the above research,we put forward some policy suggestions on perfecting the corporate governance and information disclosure mechanism,strengthening the legal system construction and supervising the state-owned enterprises.Then,we summarize the shortcomings of this study and prospects for future research.