An Effect Of Book-Tax Difference On The Accounting Conservatism

With the development of capital market in China, accounting conservatism has been paid more and more attention. Accounting conservatism is one of the important indicators to measure the quality of financial statements, reflects the demand of the investors, creditors and other stakeholders. Tax is a motivator of the accounting conservatism. In our country, due to the differences between accounting system and tax regulations, the existence of this difference, provides the possibility for the selection of manager opportunism behavior in enterprise, thus affect the earnings conservatism. Recent studies classify conservatism into two forms: conditional and unconditional conservatism. Unconditional conservatism and condition of conservatism have different causes, thus their economic effect is different, book-tax differences may have different effect on unconditional accounting conservatism and conditional accounting conservatism.As an opportunity, the implementation of the new accounting standards in 2007 and the new enterprise income tax law in 2008, using the China's a-share listed company data of the Shanghai and Shenzhen stock exchange from 2008 to 2013, verify whether book-tax differences affect the accounting conservatism. And verify the relationship between book-tax differences and accounting conservatism in different ownship property.Research found that: Firstly, book-tax difference positively correlated with unconditional conservatism, negatively correlated with conditional conservatism. Secondly, the state-owned company positive book-tax differences significantly reduced conditional conservatism, and this relationship is not significant in non-state-owned company. Negative book-tax difference enhanced conditional conservatism in non-state-owned company, while this relationship in the state-owned company is not significant. This conclusion indicates that the relationship between book-tax differences and conditional conservatism affected by ownership property. Thirdly, the relationship between book-tax differences and unconditional conservatism has no significant difference in state-owned and non state-owned company.In this paper,we put forward to the policy recommendations: Firstly,strengthen the communication and coordination of accounting system and tax regulations, reduce the earnings management space, thus reduce the tax differences; Secondly,strengthen demand for accounting standards on unconditional conservatism,strengthen the disclosure of tax information; Lastly, deepen the reform of state owned enterprises and sound corporate governance mechanism.