Accounting Conservatism And Corporate Bond Issuance Pricing

Accounting conservatism,also known as prudence,is one of the important characteristics of accounting information quality.Accounting conservatism has become the focus of scholars at home and abroad in recent years.China's Ministry of Finance defines the conservatism as: "Under uncertain conditions,enterprises should maintain due diligence in accounting confirmation,measurement and reporting of transactions or events.For example,assets or income cannot be overestimated,and liabilities or expenses cannot be underestimated.".The research on the economic consequences of accounting conservatism focuses on the financing activities and investment activities of financial entities.Among them,in the aspect of financing,especially the research on the effectiveness of debt financing,mainly including the impact on the overall debt cost,bank credit,refinancing,commercial credit and other financing effects,but less on the impact of bond financing.China's corporate bond market began in 2007,and after experiencing the suspension of the 2008 financial crisis,2009 entered a stage of rapid development.The issuance of corporate bonds has grown rapidly,and has become the third largest medium-and long-term financing facility after the bank loan market and the stock market.As of 2018,the scale of corporate bond issuance increased from 68.24 billion RMB in 2009 to 1611.816 billion RMB in 2018,with an average growth rate of 142.10%,of which the highest issuance in 2016 reached 2927.635 billion RMB.In the issuance process of corporate bonds,reasonable pricing is the core issue that determines the development of the corporate bond market.In the bond market,external bond investors have no information advantage over bond issuers due to information asymmetry.At the same time,due to the existence of agency costs,there is a conflict of interest between the issuer's shareholders and the bond investors.Robust accounting information conveys a positive signal to bond investors,with information increments,meeting the requirements of bond investors for the quality of accounting information,alleviating information asymmetry and reducing the information risk of bond investors;accounting conservatism delays the payment of dividends to shareholders and reduces the risk of bond investors.Therefore,first of all,this paper studies the impact of accounting conservatism on the pricing of corporate bond issuance.At the same time,in view of the previous scholars did not consider the difference between unconditional and conditional conservatism,this paper separately measures the unconditional and conditional conservatism in the research design,and studies its impact on corporate bond pricing.Secondly,due to the “dominant” effect of unconditional conservatism on conditional conservatism,this paper studies whether there is a difference in the impact of conditional conservatism on corporate bond pricing under different unconditional conservatism levels.Thirdly,considering the special institutional background of China,this paper explores the differences in the impact of accounting conservatism on corporate bond issuance pricing and the adjustment effect of unconditional conservatism under different ownership type.Finally,considering the influence of the lead underwriter's reputation and information asymmetry on the results,the sample is divided into the lower and higher groups of the underwriters' reputation,and the lower information transparency group and the higher group return the sample.The results show that only when the underwriters have low reputation or low information transparency,accounting conservatism can reduce the pricing of corporate bond issuance,and unconditional stability can play a regulatory role.This paper finds that:(1)Accounting conservatism(unconditional conservatism and conditional conservatism)can reduce corporate bond issuance pricing,and this effect is more significant in non-state-owned enterprises;(2)unconditional conservatism has a moderating effect on the relationship between conditional conservatism and corporate bond issuance pricing,and the moderating effect is more significant in non-state-owned enterprises;(3)When the reputation of the main underwriter is low and the information opacity is high,accounting conservatism plays a more important role in reducing the issuance and unconditional conservatism has stronger moderating effect.The contributions of this paper mainly have three aspects:(1)Enrich the research on the economic consequences of accounting conservatism,and expand the research on accounting conservatism from the fields of bank credit,commercial credit,financing constraints,investment behavior and other aspects to corporate bonds.(2)The two types of accounting conservatism were studied to make up for the lack of conditional conservatism in previous studies.(3)Consider the impact of ownership type on accounting conservatism.