Effects Of Changes In Accounting Standards On The Cost Of Equity Capital And Investment Behavior

In February 2006. the ministry of finance in our country introduced "new accounting standards", composed by one basic accounting standard and 38 specific accounting standards. The new accounting standards with IFRS as prototype and according to the China’s actual situation. so as to realize the "Substantial Convergence with IFRS". Since 2011. the International Accounting Standards Board has released and revised the fair value measurement. the consolidated financial statements and a series of standards, launched a new round of changes in the international financial reporting standards. To maintain China’s accounting standards with international financial reporting standards convergence, the ministry of finance issued in 2012 after a series of standard draft. in 2014 officially revised three new accounting standard for business enterprises. issued a standard explanation, and modify the accounting standards for enterprises basic standards of fair value measurement, in order to further promote China’s substantial convergence of accounting standards and international accounting standards. The IASB believes that the global capital market needs a set of accounting standards applied in other countries, to encourage investors to transnational investment, reduce the cost of capital, effectively promote the optimized allocation of resources, to realize the economic growth. Then, based on the developed capital market of IFRS. whether at the same time of increasing financial information correlation truly improve the quality of the financial information of the other? Most importantly, as the world’s emerging markets, China, a typical representative of execution is considered with IFRS since 2007 achieved the substantial convergence of the new accounting standards for nearly nine years (2007-2015), and how the market responses? Whether investors get more relevant and reliable information, if they really get lower cost of capital, the company’s investment behavior will be affected? Therefore, with IFRS convergence of new accounting standards in China’s capital market execution effect test is particularly important.This article selects the first 4 years before our country accounting standards reform (2003-2006) and six years after the accounting standards reform (2007-2012).during the period of 10 years, and 112 eligible listed companies in our country. Using PEG model to measure the equity capital cost. this paper empirically analyses the accounting standards change on the influence of the equity capital cost of listed companies, it is found that our country accounting standards change after the equity capital cost of listed companies has declined significantly, accounting sensitivity higher company fell more obvious. This paper adopts Richardson measurement model (2006) the efficiency of investment, empirically the our country accounting standards change influence on corporate investment behavior. Results show that our country accounting standards change, a significant reduction in the growth of listed companies in China investment, inadequate investment phenomenon had obvious inhibitory effect and over-investment phenomenon by a certain role in promoting, sensitivity, the higher the accounting company in the above cases, performance is more obvious.The contribution of this paper lies in the following three aspects:first, in this paper, by defining the sensitivity, accounting company quality information should be brought into the accounting standards change in the study of economic consequences, created a new direction in the field of this research. This article research, to the capital market regulators and accounting standard setters evaluating change lead to the economic consequences of accounting standards has important guiding significance and application value. Second, the paper along the accounting standards change, the accounting information quality, cost of equity capital investment behavior this path, for the first time to research the economic consequences of accounting standards changes from the cost of equity capital to expand to the impact on the company’s investment behavior. Based on the previous literature, according to the theory of capital preservation, categorizing investment behavior, and empirically the accounting standards change with different characteristic information of the company’s investment behavior of different impact categories. At the same time, this article groundbreaking analysis of the accounting standards change through influencing the equity capital cost and the influence on enterprises investment behavior. In this paper, the research on the company’s management of investment decision to provide certain reference significance.