Empirical Research on Accounting Conservatism and Business Financing

Abstract

In this paper, using sample data of Chinese A-share listed companies between 2007 and 2011, we measure accounting conservatism by adopting the index C_SCORE of Khan and Watts (2007) and current accruals ( CACC ) of Givoly and Hayn (2000) while conducting correlation analyses, paired tests, and multiple regression analyses. The results show that (1) accounting conservatism exists in equity financing oriented listed companies, bank loan oriented listed companies, and public bond oriented listed companies; and (2) there is a significant difference in accounting conservatism between the different groups of companies. The bank loan oriented group shows the highest level of accounting conservatism, followed by the equity financing oriented group and then the public bond oriented group.