The Study Of The Impact Of Cost Stickiness On Earnings Conservatism Of Listed Companies

The earnings conservatism,also known as the conservatism principle,as one of the basic requirements of the financial accounting information quality in our country has always been one of the hot spot in the academic field,since written into the accounting standard of China in 1992.At the same time,more and more investors,regulators and other financial information users pay more attention to the quality of financial information of listed companies,by the influence of the financial crisis since 2008 and financial fraud of listed companies.Therefore,how to improve the financial accounting information quality has become a hot topic in the society,and how to measure the earnings conservatism accurately has become the focus of academic research.The conservatism principle in the financial accounting information quality requires companies to be cautious when confirm,measure or report transactions and events.They should not overestimate assets or earnings,underestimate liabilities or expenses.This requires accountants need more confirmatory evidences to confirm "good news" than "bad news",when make the professional judgment in the face of uncertainty factors.That makes "bad news" to enter the accounting confirmation,measurement and reporting system more quickly than "good news".In 1997,Basu used stock returns to instead of "good news" and "bad news" in the estimation model of the earnings conservatism.By the empirical study,Basu found that the relationship between accounting earnings and negative stock returns was more significantly than the relationship between accounting earnings and positive stock returns.Basu used this asymmetrical relationship to measure the earnings conservatism,and pioneered the study of the earnings conservatism in the academic field.Cost management is an important concept of modern management accounting,and it is also one of the important factors for managers to make decisions.Traditional management accounting considers that there is a perfect linear relationship between costs and business volume.However,with the development of modern management accounting,the hypothesis about traditional costs behavior has been questioned.In 2003,Anderson,etc.found that when the business volume increases,the marginal increase of costs is greater than the marginal reduction of costs when the business volume reduces.They also describe the definition of "cost stickiness".The cost stickiness will be reflected in the profit because the profit is equal to revenues minus costs.When the business volume increases,the marginal increase of profits is less than the marginal reduction of profits when the business volume reduces.And also there has an asymmetrical relationship between profit and stock returns.So the cost stickiness will interfere with the measurement of earnings conservatism.This paper aims to study the relationship between earnings conservatism and cost stickiness,determine how the cost stickiness affects the earnings conservatism,and then improve the measurement accuracy of earnings conservatism.First,this paper reviewed the relevant literatures both at home and abroad,and then corrected Basu earnings conservatism of estimation model.After that,this paper screened the data of manufacturing listed companies from 2011 to 2016.Through statistical regression analysis,this paper determined that the manufacturing listed companies of our country has a characteristics of earnings conservatism and cost stickiness,then further concluded that cost variables amplified the earnings conservatism by controlling cost variables.Through the above analysis and research,it not only enhances the measurement accuracy of earnings conservatism,but also improves the overall level of the manufacturing listed companies,which is beneficial to the government regulation.