英文摘要 |
Recently, China is experiencing rapid economic growth. The governmentprogressively promotes corporate governance and strengthens earnings quality.However, frequent occurrences of corporate financial distress and fraud happen.Previous literature has not investigated the relationship between financial distress,accounting conservatism, and corporate governance. This study examines corporatefinancial distress conditions and timing influence the relationship between earningsconservatism and corporate governance. Referring to Khan & Watts (2009), thisstudy adopts C-Score as proxy for accounting conservatism. Based on the previousliterature, the sample consists of A-share listed firms in China that experiencespecial treatment rules between 1998 and 2011. The empirical results show that the relationship between corporate governance mechanisms and accountingconservatism displays non-linear variation with different business conditions anddistress timing. When the firm is at financial distress relative to normal operations,corporate earnings are more conservative. Further, in financial distress, thereappear to be a complementary relation between corporate governance andaccounting conservatism, consistent with a supply perspective (Wang, 2006). Thereseems to be a more complementary relation between corporate governance andaccounting conservatism following the financial distress. Next, the different typesof corporate governance mechanisms cause diverse effects. During normaloperations, the governance of the ownership structure (or the board of directors)has a stronger influence on the complementary (or supplementary) relation withaccounting conservatism. These results assist academics and practitioners to realizehow management discloses financial information under interactions among variousits business conditions, distress timing, and corporate governance mechanisms. |