Conservative Accounting, IFRS Convergence and Cash Dividend Payments: Evidence from China
Chao Chen and
European Financial Management, 2017, vol. 23, issue 3, 376-414
We investigate the governance role of conservative accounting in mitigating the creditorâ€“stockholder conflict by affecting firmsâ€™ 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 creditorâ€“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.
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