Accounting Conservatism,Executive Financial Background And Cost Of Debt

Accounting conservatism originated in Europe in the 15th century and influenced the practical accounting practices and theories of different countries worldwide.As a basic principle of accounting information quality,accounting conservatism has important economic consequences.Watts(1993)found that accounting conservatism was influenced by contracts,regulations and laws.Basu(1997)proposed quantifiable accounting conservatism and scholars' research on accounting conservatism went from the normative stage to the empirical stage.In just less than three decades,accounting conservatism has taken a pivotal position in accounting research and has made important practical and theoretical guidance for the development of modern enterprises.Managers have private information about the future earnings of the business.The choice of conservative accounting policies can reduce the information risk of creditors and effectively regulate the moral hazard of managers,creditors and shareholders.At the same time,accounting conservatism can help reduce information asymmetry,so that creditors can understand more accounting information,master risk information,and take effective measures to reduce risks.Conservative accounting information can effectively ease the conflict between shareholders and creditors,and thus affect the debt cost.Therefore,accounting conservatism and debt cost are closely related.The purpose of this paper is to explore the relationship between accounting conservatism and debt cost of China's A-share listed companies,and to further analyze the relationship between accounting conservatism and debt costs by incorporating the regulatory background of senior executives' financial background.This paper firstly analyzes the mechanism of accounting conservatism in reducing the debt cost and the influence of the financial background on the financial decision of the company.Then,I use the Chinese A-share listed companies from 2012 to 2016 as the research sample,conduct the quantitative statistical analysis and the hypothesis test to the sample data,systematically,examine the impact of accounting conservatism on the debt cost through the combination of theory and practice.Finally,some opinions and suggestions are put forward on how to cultivate enterprises' demand for robust accounting information and improve external supervision ability.The conclusion is as follows:firstly,accounting conservatism is negatively correlated with debt cost;Second,the stronger the financial background of the company's senior executives,the greater the impact of accounting conservatism on the company's debt costs;Third,the influence of the financial background of senior executives on the relationship between accounting conservatism and corporate debt cost is more obvious in non-state-owned enterprises(relative to state-owned enterprises).In my opinion,as an important indicator of the high-level echelon theory,the executive finance background can enrich the literature research on the robustness and debt cost.At the same time,in considering the influence of individual factors in accounting policy selection,this paper emphasizes the importance of senior executives and puts the characteristics of human capital into the financial background of senior executives.For the study of future accounting conservatism,we hope to find a conservatism measurement method that is more suitable for the actual situation of domestic enterprises,expand the research perspective of conservatism and debt cost,and analyze the role that senior executives play in conservatism.We look forward to more integration of interdisciplinary expertise and research methods across disciplines with a view to better studying the economic consequences of conservatism and managing the impact.