The Study On Incentive Factors Of Voluntary Accounting Method Changes

As a way that listed companies to manipulate profits, earnings management has long bedeviled the regulatory authority of capital markets.In order to achieve the goal of maximizing corporate value, accounting methods changes as a way of earnings management, always used to regulating profits. As the accounting method changes was permitted by accounting policy fqr regulating company's profits,and effect stock price in the end.professor William compare it to "dog wags the tail" phenomenon.There always exists asymmetric information between management, investors, creditors, regulatory authority and other stakeholder. Because the management knows much more accounting information, they can use this advantage to seek improper interests.They fully understand the impact of the accounting methods changes on the company's current and future accounting earnings and cash flow. However, other stakeholders are not available to know the influence of the accounting methods changes on the firm's short-term and long-term value. They just rely on the information disclosure. For the accounting information disclosure can not meet the requirements of the people, the management may use the accounting methods changes to manipulate accounting earnings, in order to get a higher remuneration, to obtain qualifications or to affect stock allotment. In addition, accounting methods changes like these will not only lead to wrong choice of investors,against investors'confidence, hamper the normal development of the stock market, but also prone to insider trading, resulting in the company insiders "information superiority",which will elevate or suppress the stock price. Changing accounting methods randomly will harm the long-term development of the firm, and distort the basic function of the securities market, and show incorrect information of the firm's performance. And finally it will result in inefficient allocation of resource, which is a serious threat to the healthy development of our securities market. As China has successively promulgated the new accounting standards, accountants have more choices with the policies.At present, what is the motivation of accounting methods changes? According to t accounting methods changes of western countries, the firms normally get their profit higher. However, in our country, the listed companies just get their profit lower. Why are they frequently reducing the profit? With this problem, we consider the economic consequences of contract theory and other Western economic theory under our special situation. We use an empirical analysis of China's listed companies to find out the motivation of voluntary accounting methods changes.And we want to get insights of strengthen the supervision of the voluntary accounting methods changes, and make the investors have accurate information.This paper is organized as follows.In chapter 1,we introduce the background, theoretic significance, practical implications of this paper are described, and the innovative works of this article.In chapter2,we describe the development process of changes in voluntary accounting methods Study. This chapter is divided into two parts.In the first part, the changes in voluntary accounting methods and some related concepts are described; in the second section the development processes as well as its objective evaluation in research of changes about the accounting methods both at home and abroad are introduced.In chapter3,we analyze changes in voluntary accounting policy and propose hypothesizes of our study.1:Political cost hypothesis. H1:Enterprise scale is positively related to changes in voluntary accounting methods2:Compensation contract hypothesis. H2:Compensation contract is positively related to changes in voluntary accounting methods3:Debt contract hypothesis. H3:the Asset-liability ratio positively related to the estimation of changes in voluntary accounting methods4:the hypothesis of regulatory effect in Securities market H4a:the variables of in a company with voluntary accounting methods changing are significantly higher than the sample companies with control variables. H4b:The Low-profit variables in a company with voluntary accounting methods changing are significantly higher than the sample companies with control variables. H4c:The High-profit variables in a company with voluntary accounting methods changing are significantly higher than the sample companies with control variables. H4d:the variables of ST Company with voluntary accounting methods changing are significantly higher than the sample companies with control variables.5:Operating profitability assumptions H5:The ROE of the Company with Voluntary changes in accounting methods is significantly less than the company with non-voluntary changes of accounting methods, and the changes in voluntary accounting methods have a negative correlation with the amount of affect profit.6:the assumption of Burned by and the shifts of senior managers H6:The variables of burned by and shifts of senior managers in a company with changes in Voluntary the accounting policy are significantly higher than the companies with non-voluntary changesChapter 4:Research Design.In this chapter, the mainly chooses, sources, models and variables of the sample data used in the later empirical tests are introduced which laid a foundation for later empirical tests.The data in this paper are from the CSMAR database, some data which have no direct access are collected manually. A sample is got by excluding some outliers of the corporate data which Selected in the 2003-2005 non-financial A-share listed companies,using models are used to do some regression analysis.Chapter 5:Results and Analysis.The SPSS statistical software is used to descriptively statistics the assumptions variables made in the earlier. Single factor analysis, Logistic regression and multiple regression analysis are also used to make a preliminary conclusion.Chapter 6:Conclusions, policy recommendations and the limitations.In this chapter, the research the findings of this paper are summarized and 6 policy recommendations are proposed as follows: (1):establish a high-quality corporate accounting standards; (2):Redefining the evaluation index system of enterprise operation standards (3):Regulate the corporate governance structure (4):Improve the incentive and restraint mechanisms to company's senior managers (5):strengthen the supervision of CPA's Independent practice and CPA industry. (6):implement the system of Managers-avoiding.The innovative works to related theories in this article are in the following two aspects.(1)Expand the study scope.From the data of previous studies, the choice for the scope of accounting methods changes in our nation aimed only at the accounting methods changes or a certain category of change in accounting estimates, and did not research with both of them combined. The accounting methods changes or the accounting estimation change both existed in the objectively reality application. Neglect any of them will be a vital cause for the distortion of accounting information. So enlarging the scope of the study becomes particularly important.(2)This article explores the listed company voluntary effect of accounting change and its manifestations of the securities market supervision. We find that the ultimate goal of the listed companies'accounting methods changes is to meet or avoid the supervision of the securities market. Overall, the firms in Western countries get higher profits, while many listed companies in our country choose to get their profit lower. We also find businesses burned by the "Great Purge" reduce profits. And unprofitable firms and a few low-profit firms in order to avoid losses, they make profits higher; high-profit-making enterprises take the voluntary accounting methods changes as a way to adjust their profits.The change of bad debts provision and the procedures of depreciation provision has always been the preferred method for the listed company.Finally, we find that changes in accounting estimates are also more than the accounting methods changes, because our criteria makes the accounting more flexible. So,it is difficult to reduce the listed companies'voluntary accounting methods changes by reducing the choices space of methods. And we can only make a system constraint on the listed companies which change their accounting methods randomly. This article also has some inadequacies, mainly reflected in these aspects: Firstly, as China's securities market started late, and the mandatory accounting standards change more frequently, thus the time span of this study is not long enough to do time series; Secondly, the number of companies which have voluntary accounting methods changes is still relatively small, so maybe the universality of the conclusions are affected.