Topic: Accounting Conservatism in Chinese Listed Firms: The Influence of Standards, Incentives, and Monitoring
Presenter：Donghui Wu, Assistant Professor, The Hong Kong Polytechnic University
Time: June 15, 2007（Friday）3：00—4：30 PM
Venue: Room 513, Jiageng Bld 2
Chair： Yujun Wu, assistant professor in finance, IFAS
Abstract：
This study examines the interplay of accounting standards, reporting incentives, and monitoring mechanisms in the determination of conservatism among listed firms in China. We find that more conservative accounting standards do result in more timely recognition of economic losses, an important characteristic of conservative financial reporting. In contrast, we do not find any evidence of conservatism in years when accounting rules do not allow firms to be conservative. This suggests that conservative accounting rules are a necessary ingredient in conservative financial reporting. However, we also show that accounting standards are not sufficient. In firms without proper incentives, the recognition of economic losses is still not timely even if conservative rules are available. Furthermore, we report that monitoring by other large shareholders, debt-holders, or large auditors mitigates weak incentives in conservative financial reporting. Taken together, our findings suggest that standards, incentives, and monitoring mechanisms are all necessary ingredients in fostering accounting conservatism. This study contributes to our understanding of accounting conservatism by providing evidence on inter-relationships among accounting standards, reporting incentives, and external monitoring.
Presenter Introduction：
Dr. WU Donghui has B.A. and M.A. degrees in accountancy from Xiamen University, and a Ph.D. in accountancy from The Chinese University of Hong Kong. He is currently an assistant professor at The Hong Kong Polytechnic University. His main research interest is in the use of accounting numbers in contracting and capital market. He has published refereed articles in several academic journals, including China Accounting and Finance Review, Contemporary Accounting Research, Journal of Banking and Finance, Journal of Management Accounting Research.
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