Environment Uncertainty,Accounting Conservatism And Investment Efficiency

As one of the company's important financial activities,investment plays a decisive role in the future business development of the company.How to improve the investment efficiency of enterprises and make more effective decisions are the most important issues faced by management and shareholders.The investment decision of an enterprise is not only influenced by the external environment,but also depends on whether the enterprise can obtain sufficient and effective accounting information.After the financial crisis in 2008,the environment faced by our country's enterprises was full of uncertainties and presented greater challenges to management.Accounting conservatism is one of the characteristics of accounting information.There is still some controversy about the business development of the company.Therefore,in a complex environment,what kind of investment decisions the company will make,what impact accounting conservatism has on corporate investment,and answers to these questions will help improve the company's operating standards.Based on the conceptual definition and literature review of environmental uncertainty and accounting conservatism,the article uses theoretical analysis to analyze the relationship between environmental uncertainty,accounting conservatism and investment efficiency,and proposes hypotheses and empirical evidence to study the relationship between them.For environmental uncertainty,I use The Gloss and Olsen(2009)income residual model;According to the different mechanism of accounting conservatism,it is divided into two categories: non-conditional conservatism and conditional conservatism.I use Richardson Investment Expectation model to divide the company's non-efficiency investment into over-investment and under-investment and at the same time taking into account China's special property right situation,combined with the nature of state-owned property right.The article found that: environmental uncertainty worsens the overall investment efficiency of an enterprise and cause over-investment and under-investment.Because state-owned enterprises are more easily funded than non-state-owned enterprises,environmental uncertainty in state-owned enterprises has less impact on investment efficiency.Overall,accounting conservatism will help improve the investment efficiency of the company.The conditional conservatism will help alleviating the overinvestment and underinvestment of the company,however non-conditional conservatism may lead to over-conservatism and intensify the problem of under-investment.After incorporating both environmental uncertainty and accounting conservatism into the model,conditional conservatism helps mitigate the impact of environmental uncertainty on overinvestment,but exacerbates the impact of environmental uncertainty on underinvestment.In terms of conditional conservatism,non-conditional conservatism does not have a significant effect on environmental uncertainty due to its inherent in accounting standards;in state-owned enterprises,the mitigation of financing issues by the nature of property rights exacerbates the impact of excessive corporate investment.Finally,the article suggests some policies and recommendations.Enterprises should value the measurement principle of accounting conservatism and management should be more cautious for judgment on accounting information;accounting standards should give management more room to use their own judgment;state-owned enterprises should absorb private capital for mixed-ownership reforms which will increase the usefulness of accounting conservatism in state-owned enterprises;further it is important to alleviate the financing constrains of private enterprises and promote the development of capital markets.