Earning Conservatism and the Cost of Equity Capital: From the Perspective of Investor Protection
High quality accounting information is expected to protect investors by reducing information asymmetry risk and agency cost. This paper employs the data of firms listed in Shanghai and Shenzhen Stock Exchange, and tests this hypothesis. Using earning conservatism as proxy for earning quality and information asymmetry risk, the author adopts Basu(1997) model of conservatism and research on the issues. The results show that conservatism is an important earning attribute and investor protection indicator under the circumstance of appropriate conservatism, which can bring the low cost of equity capital. In the meantime, the paper finds the phenomenon of the abnormality of cost of equity capital for the high conservatism, The conclusion of this paper plays an important role in understanding the economic consequence of conservatism and its accounting system meanings.
Conditional conservatism Cost of equity capital Information risk Investor protection
CUI Xuegang ZHANG Hongliang
School of Business, Beijing Technology and Business University, Beijing, P.R. China, 100048
国际会议
The 5th International Sympsium for Corporate Governance(第五届公司治理国际研讨会)
天津
英文
391-399
2009-09-01（万方平台首次上网日期，不代表论文的发表时间）