Relational Research Of Accounting Conservatism And Inefficient Investment In China

Accounting conservatism is an important principle in the financial reporting. Underthe new accounting standards, accounting conservatism is positioned clearly as acharacteristic of accounting information quality. In recent years more and more accountingscholars began to pay attention to accounting conservatism. Current research focuses onthe existence and impact factors of accounting conservatism, and there is very littleresearch on economic consequences. As the typical manifestations caused by the higheragency costs, inefficient investment will be infract the interests of shareholders andcreditors, and then affect the value of the company. The relationship between accountingconservatism and inefficient investment was studied empirically in this thesis.Accounting to information asymmetry and agency theory, several hypotheses aboutrelationship between accounting conservatism and non-efficient investments are proposed.Taken the data from listed companies of manufacturing industry in China during2008-2010as a sample, this thesis selects accumulated three years of negativenon-operating accruals and Richardson (2006) model as the measure of conservatism andinefficient investment. This thesis empirically tests the relationship between accountingconservatism and inefficient investment, by using of descriptive statistics, correlation testand mixed linear regression. Furthermore, this thesis tests the attributes of ultimate controlrights’ impact on the relationship between accounting conservatism and inefficientinvestment. The main research finding include:(1) Accounting conservatism inhibitobviously the occurrence of over-investment;(2) Accounting conservatism will lead to theappearance of under-investment behavior, but this effect is not significant;(3) Theattributes of ultimate control rights can not influence suppression between accountingconservatism and over-investment;(4) Accounting conservatism can reduce inefficientinvestment as a whole. This thesis not only provides new empirical evidence forunderstanding the economic consequences of accounting conservatism, and expands theidea of improving the inefficient investment behavior.