Environmental Uncertainty, Accounting Conservatism and Investment Efficiency: Evidence from China

Abstract

Purpose - The purpose of this study is to explore the impact of the application of accounting conservatism on the investment efficiency of listed companies in China under the background of the current rising environmental uncertainty. Design/methodology/approach - This study collected 14,934 observations of A-share listed companies in Shanghai and Shenzhen from 2013 to 2020, and analyzed the data by means of moderating effect test and multiple regression analysis. Findings - The results show that environmental uncertainty deteriorates the company s investment efficiency. The higher the level of environmental uncertainty, the more prone to over-investment and under-investment. Accounting conservatism plays moderating role between environmental uncertainty and investment efficiency. Among them, the moderating effect of conditional conservatism is to alleviate under-investment of the company under high financing constraints and the over-investment, while it intensifies the under-investment under low financing constraints. The moderating effect of unconditional conservatism is to alleviate the under-investment. Research implications or Originality - This study finds out the internal mechanism of accounting conservatism affecting investment efficiency, which not only helps to understand about the value of accounting conservatism standards, but also helps to improve the investment efficiency of listed companies.