Correlation Study On The Characteristics Of The Ultimate Controlling Shareholder And Accounting Conservatism

The more advanced the economy becomes, the more important accounting is. Accounting conservatism is one part of quality of accounting information. It plays an important role in reducing asymmetric information between the principal and the agent, as well as improving the efficiency of economic operation. However, investors are hard to know the degree of robustness from the enterprise’s financial statements. If the ultimate controlling shareholder and accounting conservatism correlated, we can judge the accounting conservatism by understanding the characteristic of ultimate controlling shareholders. Based on it, this paper examines the relationship between the ultimate controlling shareholder’s features and accounting conservatism, which is based on Basu model and C-Score model.This paper presents assumptions on the relationship between the ultimate controlling shareholder features and accounting conservatism. The data is from Chinese A-share companies from 2009 to 2012, including samples of 3087 companies. Accounting conservatism is measured respectively based on Basu model and C-Score model. Then the relationship between ultimate controlling shareholder features and accounting conservatism is analyzed. Lastly, the relationship between ultimate controlling shareholder behavior and accounting conservatism is tested with the methods of descriptive statistical analysis, multiple linear regression and correlation test, etc. The results indicate that:(1) with the increase of proportion of control power of ultimate controlling shareholders, accounting conservatism becomes lower; (2) Accounting conservatism is higher when the degree of separation of ownership is lower; (3) The accounting conservatism of the enterprises whose ultimate controlling shareholder is the state-owned is lower than the enterprises whose is non-stated.We analyze the deep effect of the reporting entity’s economic motivation on stability from the perspective of the demanders and the suppliers. At the same time, the empirical data is provided for the reality that the ultimate controlling shareholders will reduce the conservatism in accounting to obtain their own interests. In China, the majority of the listed companies’ equity is highly centralized and they are state-owned, the first major shareholder will use false accounting information to grasp and plunder the interests of small shareholders. We investigate the accounting conservatism of the Chinese listed companies from the perspective of the ultimate controlling shareholder, it will help us to better protect the interests of the investors, improve accounting information, to inject new vitality for the healthy development of the capital markets.