Institutional Environment, Ultimate Controlling Shareholders And Accounting Conservatism

Accounting conservatism has been an irreplaceable important principle in accounting practice. Because accounting conservatism can effectively reduce the information asymmetry and reduce agency cost, it plays an important role in corporate governance. Wait until Basu,beginning in 1997, a surplus compensation inverse regression model is put forward to open another chapter of quantitative research. Since La Porta, etc. (1999) put forward the concept of ultimate controlling shareholders, its existence in the world has been proved by a lot of scholars. China, as an emerging and transition economies, medium-sized enterprises'equity concentration phenomenon is more prominent. In order to enlarge their own wealth, controlling shareholders tend to manipulate accounting information in a hidden way and conceal their interests in the interests of minority shareholders. Due to China's relevant laws and regulations have yet to be perfect, the protection of investors is not sufficient,it is of great significance to explore the influence of ultimate controlling shareholders on the level of corporate conservatism in order to analyze the way to change their financial information to cover up their own expropriation behavior. Combined with the institutional environment in China, the research of small and medium-sized enterprise's ultimate controlling shareholders and the relationship between the accounting conservatism,to explore a more reasonable equity structure,also for the future external and internal supervision mechanism perfecting laws and regulations to provide advice, thus effectively protect the interests of the investors, promote the healthy and persistent development of securities markets.Combining with theoretical analysis and empirical analysis method,First of all,the relevant literature at home and abroad to sort out,clarify the writing ideas of this article; then in the empirical aspect, after comparing and analyzing many kinds of econometric models,the Basu (1997) model,which is the most frequently used and the highest academic recognition, is chosen to measure the Accounting Conservatism. Adopt certain rules and measures to deal with data, and ultimately selected the three years from 2013 to 2015, 656 small and medium-sized boards of listed companies in 1408 valid data as the research sample, Combined with China's institutional environment index in 2014, after the regression of all the samples, the following three conclusions are drawn:(1) The cash flow rights of the ultimate controlling shareholders of the small and medium sized enterprises in China are positively correlated with the level of accounting conservatism. Therefore, an increase in the proportion of cash flow rights means better robustness;(2) the ultimate controlling shareholders of small and medium-sized enterprises of the two rights separation degree is negatively related to the level of accounting conservatism, but the result was not significant may be due to the small and medium-sized enterprise more for private family enterprises in our country. In order to improve enterprise value,family control shareholders and the interests of small and medium investors began to converge, willing to share information with them to reduce the manipulation of accounting information;(3) the improvement of the institutional environment can effectively promote thepositively relationship between the ultimate controlling shareholders cash flow right and accounting conservatism. The inspiration of this paper is that we should constantly improve the institutional environment and laws and regulations, and form a reasonable ownership structure of the company, so as to effectively restrain the ultimate controlling shareholder's infringement on the interests of minority shareholders and improve the level of accounting conservatism.