The System Environment, Timely Loss Recognition And The Cost Of Equity Capital

Accounting conservatism is not only an important information quality characteristic of financial reporting, but also the effective corporate governance mechanism.However, with the fair value measurement of the promotion and America financial accounting standards board and the International Accounting Standards Board will accounting conservatism from the conceptual framework of financial report is removed,the economic consequences of accounting conservatism has become the focus of research.Specific to the Chinese system background, the accounting conservatism of what kind of role play in the governance mechanism, what is the impact on the cost of equity capital, is an important problem in the academic circles and practical circles are very concerned.In this paper, in order to make Chinese A shares of listing Corporations as a sample, to study the relationship between accounting conservatism and the cost of equity capital of the special system background of property right of our country, and after the implementation of new accounting standards in 2007, loss recognition timeliness effect mechanism on the cost of equity capital. The empirical part of the study include the timeliness and cost of equity capital loss confirmed; different system environment,research on the relationship between timeliness and cost of equity capital loss recognition;in 2007 before and after the timely loss recognition and the cost of equity capital to research the relationship between three parts.According to the analysis of the results, as an alternative mechanism of corporate governance, timely loss recognition can reduce the necessary return rate of investors,which was negatively associated with the cost of equity capital. The higher the area developed degree of loss of company, confirm the negative relationship between timeliness and cost of equity capital is more weak, level of economic development will reduce the loss recognition timeliness effect mechanism on the cost of equity capital, the higher the area developed level of the company timely loss recognition is less important. In 2007 the implementation of new accounting standards, enhanced the loss recognition timeliness effect mechanism on the cost of equity capital, reducing the cost of equity capital.According to the research conclusion, the paper gives relative suggestions.