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Conservative Accounting, IFRS Convergence and Cash Dividend Payments: Evidence from China
Author(s) -
Bradford William,
Chen Chao,
Zhu Song
Publication year - 2017
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12114
Subject(s) - corporate governance , accounting , creditor , shareholder , business , dividend policy , dividend , convergence (economics) , conservatism , cash , economics , financial system , monetary economics , finance , debt , macroeconomics , politics , political science , law
We investigate the governance role of conservative accounting in mitigating the creditor–stockholder conflict by affecting firms’ dividend policies, and how the convergence to International Financial Reporting Standards (IFRS) affects the governance role of conservative accounting as it relates to dividend policy. We analyze data on Chinese listed firms from 2000 through 2011. The use of conservative accounting reduced cash dividend payouts, thereby playing a governance role by mitigating the firm's creditor–stockholder agency conflict. However, China's convergence to IFRS reduced the governance role of conservative accounting on dividend policy by reducing the accounting conservatism of listed firms in China.