Research On Management Background Characteristics And Accounting Conservatism

Accounting conservatism is an important principle of recognition and measurement of accounting earnings. There are different interpretations of accounting conservatism by related accounting standard-setting organizations and accounting academics. Basu(1997) proposes a descriptive definition for accounting conservatism, which means that good news (gain) needs much more assurance than bad news (loss) in the financial reports recognition. This definition reflects asymmetric treatment of gains and losses by accounting conservatism. Nowadays the researches on accounting conservatism are generally based on this definition. The existing literature shows that the company contracts, especially the factors of financing contracts, litigations, government regulations, tax policies, corporate governance, firm characteristics, political relations, economic development level, may affect the accounting conservatism. Meanwhile, rare literatures consider the effects of accounting conservatism on management background characteristics. However, this effect can not be ignored in reality. An essential feature of the modern enterprise is that its ownership and management are separated, with which managers control the enterprises. Therefore, the managers have a decisive influence on corporate behavior and performance. and this effect is mainly reflected on accounting behaviors. As a universal language of business, accounting information is an important reference to the managers and the stakeholders to decide whether to sign the contracts, whether to perform the contracts, and whether to amend the contracts. In the process of accounting policy choice, managers may choose the corporate accounting policies on behalf of their own interests rather than the interests of all stakeholders, which surely affects accounting conservatism. In reality, managers are not always rational, their behaviors are subjected to their personal overconfidence, short-sighted behaviors and empirical prejudice psychological deviation, while the above psychological deviations are closely linked to their personal background characteristics. Therefore, the impacts of managers on accounting conservatism are quite different among different background characteristics of managers, such as different sexes, ages, educational backgrounds, educational backgrounds and tenures.On the basis of the results of relevant researches both home and abroad, starting from upper echelons theory and behavioral economics, according to the principal-agent theory, contract theory and signaling theory, using normative, empirical and contract analysis, this dissertation theoretically and empirically tests the impact of management background characteristics on accounting conservatism. First, it reviews the related researches and analysis relevant theories. Then, it analyzes the measurement method choice of accounting conservatism theoretically and empirically. And then, this dissertation tests the impacts of the manager fixed effects on accounting conservatism on a whole. Subsequently, this dissertation empirically investigates the impact of the average level, heterogeneity and vertical characteristics of the background characteristics of the management team on accounting conservatism. And then it investigates the impact of the demographic characteristics of the chairman and Chief Financial Officer on accounting conservatism. Finally, come the summary of the conclusions, policy implications of the study and directions of future research. The empirical results show that the manager fixed effects significantly influence the accounting conservatism. The average level, heterogeneity and vertical characteristics of the background characteristics of the manager team, as well as different background characteristics of the Chairman and Chief Financial Officer have certain influences on accounting conservatism, and these effects differ between the state-owned listed companies and non-state-owned listed companies.There are following three innovations in this dissertation. First, it establishes the analysis framework of accounting conservatism from the perspective of manager background characteristics. The existed researches on accounting conservatism implicitly regard that the managers are homogeneous and rational, but a large number of studies have shown that different managers have different personal preferences and management style. they are not always rational and are often suffered from mental deviation and make irrational decisions. Therefore, study the impact of management background characteristics on accounting conservatism by upper echelons theories is helpful to expand the research perspective of accounting conservatism, to reveal the motives of accounting conservatism, and deepen public understanding of accounting conservatism. Secondly, it studies the comparison and selection of accounting conservatism measurement method from the points of the relevance and reliability. Although recently, the academia have brought out some measurement methods of accounting conservatism, but those researches are short of comparative analysis for the effectiveness of these methods, which certainly affects the validity of the results of empirical research. Therefore, the comparison and selection study of accounting conservatism measurement methods is helpful to select the measurement methods, thereby to enhance the validity of the empirical research results. Thirdly, this dissertation analyzes the managers fixed effect from the perspective of manager control. Existed researches on the effect of managers background characteristics on corporate behavior are most analyzed by directly selecting the specific characteristics of the managers, but rare literatures investigate the root causes of that. Related researches indicate that, except the controlling factors of industry and enterprise, there are many other influence factors which can not be explained. From the perspective of behavioral economics, this dissertation inspects the managers fixed effect on accounting conservatism, which provides a basis for the selection of indicators for managers specific background characteristics.