Accounting Standards Evolution,Institutional Investors Heterogeneity And Cost Of Debt Financing

Corporate financing cost is a kind of special agency cost and the essence of financing is that the investors provide managers with fund for corporate operating.This is based on the corporate’s promise of paying back the principal and interest,which in some extent the promise can guarantee the safety of investors’ interests,and of the investors’ trust to the companies.The establishment and sustainability of trust needs solid investor protection mechanism.However,when is comes to the issue of investor protection,traditional financing theory always concentrates on the protection for shareholders and the issue of creditors protection is always is neglected,which is because the failure of balancing creditors’ interest and the company’s business performance.And the control will be transferred to creditors from companies only when the companies betrayed the debt contract.So the traditional theory has ignored the risk issue during debt investing and the protection of creditors’ interests.The 2007 accounting standards revolution,especially the introduction of fair value accounting,achieved the transfer from accountability perspective to decision usefulness view,which indicates the new standards pay more attention to some aspects that the accounting information should reflect the economic essence and should be beneficial for the decision of stakeholders.But the truth that China’s environment is not mature and that the implementation is different among different areas increased uncertainty of the application effect of the new standards as whether the accounting reliability and robustness are influenced is unsure and the present research conclusion didn’t reach consensus.Besides,the new standards may increase the information asymmetry the same time increasing the overall accounting quality.All of these facts reflect the necessity of studying the relation between accounting standards revolution and cost of debt financing.Ownership structure and governance environment will exert great impact on the new standards application for companies,so various investors will play different roles in the relation between accounting standards revolution and the cost of debt financing.Hence,we introduce institutional investors to further analyze their regulating effect in the relation between accounting standards revolution and cost of debt financing.Based on the above description,this paper takes 2003-2010 A-share listed companies as samples,discussing the relationship of accounting standards revolution,institutional investors heterogeneity and costs of debt financing.Based on the empirical study,we find that:(1)accounting standards revolution reduced cost of debt financing;(2)the institutional investors with relatively high shares reduced the sensibility of cost of debt financing on accounting standards revolution;(3)the independent institutional investors with relatively high shares reduced the sensibility of cost of debt financing on accounting standards revolution,but the dependent institutional investors didn’ t influence their relationship.In order to justify the robustness of the above analysis,this paper use different ways to validate the consequences and the robustness analysis supports the study consequences.We make several contributions to the literature:(1)in theory,this paper studies the economic consequences of accounting standards revolution by analyzing the relation between accounting standards revolution and cost of debt financing,the relation between accounting standards quality and accounting information quality and China’ s system environment;this paper tries to build the exact relation between accounting standards and corporate behavior and to improve the study of the economic consequences of new standards revolution by introducing institutional investors.(2)in practice,the conclusion of this paper can help companies to coordinate the relation between debt financing,the financial condition and the management of the companies so as to elevate the implementation of new standards,improving accounting information and reducing the cost of debt financing.Creditors should focus on the accounting information and non-accounting information together in order to reduce the debt risk;the government should guide the investment of institutional investors reasonably and balance the development of institutional investors.