What is accounting conservatism? Which firms are more likely to adopt accounting conservatism if they want...

What is accounting conservatism? Which firms are more likely to adopt accounting conservatism if they want to have access to bank loans? SOE or Non-SOE? Why?

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Conservatism Principle is a concept in accounting under GAAP which recognises and records expenses and liabilities-certain or uncertain in nature, as soon as possible but recognises revenues and assets when they are assured of being received. It gives a clear guidance in recording cases of uncertainty and estimates.

firms receive more bank loans after the stimulus package which is less significant for firms with conservative accounting. In addition, firms with conservative accounting exhibit higher investment efficiency, which becomes weaker after the stimulus package which represents an exogenous shock to credit supply. Further analysis shows that the abovementioned findings are more significant for non-SOEs, firms from less government-favoured industries and regions, and firms with severe interest conflicts between debtholders and shareholders. These results are robust for alternative specification and alternative measurements.

ekkarill92 answered 2 years ago

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