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The effects of accounting conservatism on investment decision: Evidence from listed companies in China

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  • Haixin Ma
  • Kyunbeom Jeong

Abstract

This study investigates the effect of accounting conservatism on corporate investment decisions in China. Specifically, we analyze how accounting conservatism affects a company’s investment decision-making. Furthermore, we examine the difference in this effect of accounting conservatism on investment decision between public and private companies. The results of the analysis are as follows. First, accounting for conservatism can suppress the occurrence of inefficient investments. In a full sample, a public company sample and a private company sample, it shows a negative relationship between accounting conservatism and excessive investment. Second, the deterrent effect of accounting conservatism on corporate inefficient investment in public companies is weaker than in private companies. With these results, we can conclude that even in a special environment like China, accounting conservatism can affect the investment activities of companies and this effect is different depending on the type of the company.

Suggested Citation

  • Haixin Ma & Kyunbeom Jeong, 2022. "The effects of accounting conservatism on investment decision: Evidence from listed companies in China," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2093484-209, December.
    • Handle: RePEc:taf:oabmxx:v:9:y:2022:i:1:p:2093484
    DOI: 10.1080/23311975.2022.2093484
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