The Relation Between Chinese Accounting Standards Convergence Upon IFRS And Accounting Information Quality

The generally accepted viewpoint about the relation between the accounting standards and the accounting information quality is, the accounting information quality have been remarkably influenced by the accounting standards. In this thesis the proposition is whether the accounting standards change improves the accounting information quality or not. The important research background is that IASB (stands for’International Accounting Standards Board’) have been carrying out the whole world accounting standards convergence plan, and IFRS is often regarded as the high quality accounting standards, which exert the strong impacts on various countries’ accounting standards setting, accordingly, converging upon IAS (International Accounting Standards) on different degree.However, the existing literatures about accounting standards and the accounting information demonstrate that changing solely the accounting standards is likely to have limited effects on the accounting information quality, while firms’ reporting incentives and country institution complementary play more important roles in regulating the enterprise reporting incentives. These two base viewpoints apply for the role of IFRS adoption on the accounting information quality of those countries, and this suggests that many countries’convergence upon IAS does not lead to their firms’ reporting practices convergence. Due to the arguments about the effects of IFRS adoption on the accounting information quality and their mixed evidences, many important related issues, for example, has either IFRS or many countries’accounting standards convergence upon the IAS been effectively and same executed especially for those developing countries that have different institution frameworks, or lack some fundamental institutions. Have IFRS adoption realized or improved firms’ reporting quality and their comparability all over the world. All these questions are the hottest issues of recent studies of the international accounting.In order to meet the demands of China Reform and Opening, Chinese Accounting Standards setting and change under the dominate strategy of convergence upon IAS are main points of China accounting change. Whether the process of Chinese Accounting Standards Convergence under the whole system structure change of China society is moderate or not, is one of important empirical issues.The thesis is based on the related theory of the New Institution Economics and the mainstream of modern firms’ contract theory, and uses the analysis framework of the relation between modern firms’ rights of making accounting rules and the accounting information, which considers that the accounting standards setting and accounting standards executing, and the contract of arranging the rights of making residual accounting rules derived from the incomplete common contract of accounting standards, are the important influential factors. In addition, the accounting standards international convergence all of the world exerts great impact on Chinese Accounting Standards setting, and causes the problems of actual execution of Chinesse Accounting Standards Convergence upon IFRS.In this thesis, the positive research is to examine the actual effect of China Accounting Standards setting dominated by the strategy of the convergence upon the International Accounting Standards. The paper choose Chinese listed company those issue A stocks in China stocks markets except for finance industry (including A, B or H cross-listed companies) in the period from the year of 1999 to 2008, divides the whole research samples into three sub-samples according to three different phases of China Accounting Standards convergence. The positive research uses the models of Barth et al.(2008) to do the comparative study on the relation between China Accounting Standards convergence upon IFRS and the accounting information quality evaluated by different quality properties of accounting information respectively, including the earnings management quality, the timeliness of loss reorganization and the value relevance. The main conclusion is as follows:Firstly, in the process of China Accounting Standards convergence upon IFRS, the value relevance of stock price on net income and equity book value reduces largely after adopting Chinese accounting standards of 2000, while significantly increases after adopting Chinese accounting standards of 2006. With the increase of Chinese Accounting Standards convergence degree, the value relevance of net income per share on annual stock return gradually increases both after adopting Chinese Accounting Standards of year 2000 and year 2006.Secondly, the frequency of timely recognition large loss increases more frequent after adopting Chinese Accounting Standards of year 2000,while it reduces a lot after adopting Chinese Accounting Standards of year 2006.Thirdly, with the increase of Chinese Accounting Standards convergence degree, the volatility of the accounting earning increasingly becomes larger, while the inverse correlation of the accrual and cash flow gradually becomes weakly. Moreover, after adopting Chinese Accounting Standards of year 2000, the ratio of the variability of the change in net income to the variability of the change in operating cash flows is the highest and managing towards positive earnings becomes more frequently.In summary, this thesis uses Barth et al. (2008) models to do comparative study of the relation between Chinese Accounting Standards convergence upon IFRS and the accounting information quality, the evidence of Chinese Accounting Standards executing under China institution background reveals that the process of Chinese Accounting Standards convergence upon IFRS is moderate, and the value relevance significantly enhances. Both positive earning management and the frequency of timely recognition large loss are inhibited to some extent after adopting Chinese Accounting Standards of year 2006.This paper examines the process of China accounting convergence upon the International Accounting Standard and provides some related suggestions.