Accounting System Reform and Earnings Conservatism:Empirical Evidence of Chinese listed Companies

It has been a controversial issue whether a high quality accounting standard will lead to a high quality financial report.To test the validity of the debate,this paper analyzes the effect of the accounting standards and preparers’motivation on the earnings stability in tems of complements and substitutes against the backdrop that in China preparers’incentives to issue conservative financial report have remained low with little hange while more and more conservative rules are issued in 1994-2008.The finding is that listed companies have earnings conservatism only after 2001,which partly supports the substitution theory of Holthausen(2003).