Reasearch On Accounting Conservatisim,Internal Control And Over Investment

Because of the asymmetry of information and incomplete contract,there are agency conflicts in company.The principal and the agent in the decision-making will be from their own interests,the interests of the main differences between them and then lead to the agency conflict.In the agency conflict,the agent is entrusted to participate in the management activities of the enterprise directly.Because of the existence of asymmetric information,the client is in a disadvantageous position,which causes the agent’s self-interest behavior,and over investment behavior is also one of the performance.Therefore,how to reduce the information asymmetry and alleviate the agency conflicts between the internal and external stakeholders is an important problem that must be solved.Accounting conservatism is not only one of the important characteristics of accounting information quality,but also an important part of corporate governance mechanism.To improve the accounting conservatism can not only reduce the information asymmetry between the various stakeholders and mitigate the conflict between agents,but also help restrain excessive investment behavior.The root cause of internal control is the agency problem in the enterprise,and the problems caused by the agency problem is the basic problem to internal control to solve.And in order to restrain the over investment behavior of enterprises,it is necessary to mitigate agency conflicts and reduce the information asymmetry between internal and external stakeholders.Therefore,the internal control can restrain the excessive investment behavior at the beginning of its production.At present,there are a lot of literatures about accounting conservatism,internal control and over investment at home and abroad,but there is little literature about the links between accounting conservatism,internal control and over inverstment.Based on this,this paper will study the relationship between accounting conservatism,internal control and over investment,and it will has a certain theoretical and practical significance to do this.Based on the correlational research results in domestic and foreign,and based on the agency theory,asymmetric information theory and free cash flow theory,this paper makes a theoretical analysis of the relationship between accounting conservatism,internal control and over investment firstly.Secondly,the accounting conservatism and internal control quality are measured by KW method and Fang Hongxing’s revised internal control measurement method respectively,using Richardson’s expected investment model to measure excessive investment in the company,control variables are selected at the same time.Lastly,we analyze the relationship between accounting conservatism,internal control and over investment three with empirical method.Through the theoretical analysis and empirical test,the following three conclusions are obtained in this paper:(1)The relationship between accounting conservatism and over investment is negative,but it is not significant in statistic,which indicates that the accounting conservatism can restrain the excessive investment behavior,but the effect is not significant.(2)There is a significant negative correlation between internal control and over investment,which indicates that high quality internal control can effectively restrain excessive investment behavior in the campany.And compared with the state-owned enterprises,the negative relationship between internal control and over investment is more significant in private enterprises,it shows that the high quality internal control can restrain the over investment behavior more effectively in the private enterprises than that in state-owned enterprises.(3)there is a complementary effect between accounting conservatism and internal control in restraining over investment,that is,in the case of the absence of accounting conservatism,the high level of internal control quality plays a more active role in the process of accounting conservatism and over investment.Compared with the state-owned enterprises,the complementary effect is more obvious in the private enterprises.The conclusions of this paper can provide theoretical support for the formulation of policies to curb overinvestment in company,at the same time as the accounting conservatism principle of choice and not provide relevant evidence,provide a reference basis in order to improve the construction of internal control system and give full play to the role of internal control.