Motivation of Accounting Conservatism among listed firms in China: Contract or Regulation

This study examines the motivation of accounting conservatism which is originated from firms contract or government accounting regulation among listed firms in China. We find that accounting conservatism in Chinese listed firms is not originated from firms contract incentives, and is resulted by introducing international accounting standards in the process of the economic system reform. Conservative accounting standards are a necessary ingredient in conservative financial reporting, and are not sufficient ingredient in conservative financial reporting. Legal environment, firms contract incentives, accounting standards regulation, are all necessary ingredients in fostering accounting conservatism, improve financial report conservatism degree.