The Study On The Influence Of Accounting Information Quality On Investment-Cash Flow Sensitivity Under The Soft Budget Constraint

With the development of the capital market, it is more competitive. The external financing of companies are limited more, and the cost is higher. There also exists the problem of agency conflict. All the above factors make the companies prefer to invest with their own capital. As a result, there exhibits the investment-cash flow sensitivity.And many scholars have done research on it for a long time.Many scholars did the research from the root causes, such as the scholars represented by FHP (1988), found that the investment-cash flow sensitivity caused by financing constraints; some scholars represented by Jensen (1986) and others,thought the agency cost is the root cause; there also exists scholars who agreed with both of the views. In recent years, more scholars do the study from the applications of the investment-cash flow sensitivity, and found the differences of district and the level of corporate governance could affect it.Based on visual angle of application, the paper refer to the research ideas and methods abroad, explore whether the quality of accounting information could improve the investment-cash flow sensitivity, regarding the quality of accounting information as a starting point. This paper argues that financing constraints and agency costs both lead the investment to be sensitive to cash flow. For the capital pricing and corporate governance functions of accounting information, improving the quality of the accounting information is in favor of improving the corporate financing constraints and agency costs. Therefore, we assumes a significant inverse correlation between the quality of accounting information and investment-cash flow sensitivity.To confirm the hypothesis’ validity, we select total of1382non-financial companies listed in Shenzhen Stock Exchange from2007to2013as samples. The results proved that improving the quality of accounting information, can reduce the investment-cash flow sensitivity.The paper also introduces the soft budget constraints, and further compares the difference of the quality of accounting information’s function on investment-cash flow sensitivity under different degrees of SBC. We find, with the improvement of the SBC degree, the function of accounting information quality will be weaker and even failure. That is, in the enterprises with high degree of SBC, the function of the quality of accounting information on investment-cash flow sensitivity is not obvious and even failure; in the enterprises with the weaker degree of SBC, the function is more significant.