Bargaining Power of Suppliers and Buyers, and Accounting Conservatism—Evidence from Chinese Manufacturing Listed Companies
Affiliation(s)
1 Department of Accounting and Finance, Nanjing Normal University, Nanjing, China. 2 College of Economics and Management, Nanjing University of Science and Technology, Nanjing, China. 3 College of Computer Science and Technology, Nanjing Normal University, Nanjing, China.
1 Department of Accounting and Finance, Nanjing Normal University, Nanjing, China. 2 College of Economics and Management, Nanjing University of Science and Technology, Nanjing, China. 3 College of Computer Science and Technology, Nanjing Normal University, Nanjing, China.
ABSTRACT
Using the panel data of Chinese manufacturing listed companies from 2003 to 2012, this paper examines the effects of suppliers’ and franchisers’ (buyers’) bargaining power on accounting conservatism. The empirical research proves that there is an inverted U-shape relationship between suppliers’ bargaining power and conditional conservatism, with lower left wing and higher right wing. The relationship between franchisers’ (buyers’) bargaining power and conditional conservatism is not significant. On the contrary, there is a U-shape relationship between suppliers’, franchisers’ (buyers’) bargaining power and unconditional conservatism. The relationship between suppliers’ bargaining power and unconditional conservatism has higher left wing and lower right wing. Our research results explain how strong suppliers and franchisers (buyers) affect companies’ accounting practices in the Chinese context. In the meantime, our results provide support to the contracting explanation for accounting conservatism.
Using the panel data of Chinese manufacturing listed companies from 2003 to 2012, this paper examines the effects of suppliers’ and franchisers’ (buyers’) bargaining power on accounting conservatism. The empirical research proves that there is an inverted U-shape relationship between suppliers’ bargaining power and conditional conservatism, with lower left wing and higher right wing. The relationship between franchisers’ (buyers’) bargaining power and conditional conservatism is not significant. On the contrary, there is a U-shape relationship between suppliers’, franchisers’ (buyers’) bargaining power and unconditional conservatism. The relationship between suppliers’ bargaining power and unconditional conservatism has higher left wing and lower right wing. Our research results explain how strong suppliers and franchisers (buyers) affect companies’ accounting practices in the Chinese context. In the meantime, our results provide support to the contracting explanation for accounting conservatism.
KEYWORDS
Financial Disclosures, Accounting Conservatism, Concentration Degree, Suppliers, Franchisers
Financial Disclosures, Accounting Conservatism, Concentration Degree, Suppliers, Franchisers
Cite this paper
Zhao, Z. , Wu, D. and Sha, S. (2015) Bargaining Power of Suppliers and Buyers, and Accounting Conservatism—Evidence from Chinese Manufacturing Listed Companies. Journal of Financial Risk Management, 4, 11-21. doi: 10.4236/jfrm.2015.41002.
Zhao, Z. , Wu, D. and Sha, S. (2015) Bargaining Power of Suppliers and Buyers, and Accounting Conservatism—Evidence from Chinese Manufacturing Listed Companies. Journal of Financial Risk Management, 4, 11-21. doi: 10.4236/jfrm.2015.41002.
References
[1] Ali, A., Klasa, S., & Yeung, E. (2009). The Limitations of Industry Concentration Measures Constructed with Compustat Data: Implications for Finance Research. Review of Financial Studies, 22, 3839-3871.
http://dx.doi.org/10.1093/rfs/hhn103 [2] Banerjee, S., Dasgupta, S., & Kim, Y. (2008). Buyer-Supplier Relationships and the Stakeholder Theory of Capital Structure. The Journal of Finance, 63, 2507-2552.
http://dx.doi.org/10.1111/j.1540-6261.2008.01403.x [3] Basu, S. (2001). Discussion of “On the Asymmetric Recognition of Good and Bad News in France, Germany and the United Kindom”. Journal of Business Finance and Accounting, 28, 1333-1349.
http://dx.doi.org/10.1111/1468-5957.00417 [4] Beaver, W. H., & Ryan, S. G. (2005). Conditional and Unconditional Conservatism: Concepts and Modeling. Review of Accounting Studies, 10, 269-309.
http://dx.doi.org/10.1007/s11142-005-1532-6 [5] Farber, D., Hsieh, H. Y., Jung, B. et al. (2012). The Impact of Non-Financial Stakeholders on Accounting Conservatism: The Case of Labor Unions. SSRN 2001940. [6] Hui, K. W., Klasa, S., & Yeung, P. E. (2012). Corporate Suppliers and Franchisers (Buyers) and Accounting Conservatism. Journal of Accounting and Economics, 53, 115-135.
http://dx.doi.org/10.1016/j.jacceco.2011.11.007 [7] Liu, F., & Zhou, F. Y. (2007). Does the Big Four Means High Quality of Auditing. Accounting Research, 3, 79-87. [8] Roychowdhury, S., & Watts, R. L. (2007). Asymmetric Timeliness of Earnings, Market-to-Book and Conservatism in Financial Reporting. Journal of Accounting and Economics, 44, 2-31.
http://dx.doi.org/10.1016/j.jacceco.2006.12.003 [9] Tang, Y. J. (2009). Bargaining Power of Suppliers and Franchisers, and Corporate Performance—Evidence from Chinese Manufacturing Listing Companies in the Year 2005-2007. Chinese Industrial Economy, 10, 67-76. [10] Watts, R. L. (2003). Conservatism in Accounting Part I: Explanations and Implications. Accounting Horizons, 17, 207-221.
http://dx.doi.org/10.2308/acch.2003.17.3.207 [11] Zhang, J. X., & Wang, Y. (2013). Accounting Conservatism and Corporate Financing Constraints—Research Based on Two Types of Perspectives of Accounting Conservatism. Accounting Research, 9, 44-50.
[1] Ali, A., Klasa, S., & Yeung, E. (2009). The Limitations of Industry Concentration Measures Constructed with Compustat Data: Implications for Finance Research. Review of Financial Studies, 22, 3839-3871.
http://dx.doi.org/10.1093/rfs/hhn103 [2] Banerjee, S., Dasgupta, S., & Kim, Y. (2008). Buyer-Supplier Relationships and the Stakeholder Theory of Capital Structure. The Journal of Finance, 63, 2507-2552.
http://dx.doi.org/10.1111/j.1540-6261.2008.01403.x [3] Basu, S. (2001). Discussion of “On the Asymmetric Recognition of Good and Bad News in France, Germany and the United Kindom”. Journal of Business Finance and Accounting, 28, 1333-1349.
http://dx.doi.org/10.1111/1468-5957.00417 [4] Beaver, W. H., & Ryan, S. G. (2005). Conditional and Unconditional Conservatism: Concepts and Modeling. Review of Accounting Studies, 10, 269-309.
http://dx.doi.org/10.1007/s11142-005-1532-6 [5] Farber, D., Hsieh, H. Y., Jung, B. et al. (2012). The Impact of Non-Financial Stakeholders on Accounting Conservatism: The Case of Labor Unions. SSRN 2001940. [6] Hui, K. W., Klasa, S., & Yeung, P. E. (2012). Corporate Suppliers and Franchisers (Buyers) and Accounting Conservatism. Journal of Accounting and Economics, 53, 115-135.
http://dx.doi.org/10.1016/j.jacceco.2011.11.007 [7] Liu, F., & Zhou, F. Y. (2007). Does the Big Four Means High Quality of Auditing. Accounting Research, 3, 79-87. [8] Roychowdhury, S., & Watts, R. L. (2007). Asymmetric Timeliness of Earnings, Market-to-Book and Conservatism in Financial Reporting. Journal of Accounting and Economics, 44, 2-31.
http://dx.doi.org/10.1016/j.jacceco.2006.12.003 [9] Tang, Y. J. (2009). Bargaining Power of Suppliers and Franchisers, and Corporate Performance—Evidence from Chinese Manufacturing Listing Companies in the Year 2005-2007. Chinese Industrial Economy, 10, 67-76. [10] Watts, R. L. (2003). Conservatism in Accounting Part I: Explanations and Implications. Accounting Horizons, 17, 207-221.
http://dx.doi.org/10.2308/acch.2003.17.3.207 [11] Zhang, J. X., & Wang, Y. (2013). Accounting Conservatism and Corporate Financing Constraints—Research Based on Two Types of Perspectives of Accounting Conservatism. Accounting Research, 9, 44-50.