Accounting Policy Choice

Referring to the result of empirical analysis, the dissertation uses the fundamental principle of the economics and management to study the accounting policy choice from the relationship between accounting and the contract theory, the stakeholder theory, respectively. The dissertation accounts for that the basic reason that the accounting policy choice characterized of opportunism is the native defect of the contractual theory. Another important factor is that the inside and outside mechanism of restriction of accounting policy choice is out of balance. Accounting policy choice according to the stakeholder theory can validate to prevent this basic defective and maximize the interest of stakeholder under inside and outside mechanism of restriction. The accounting policy choice is an important part of the accounting theory and is important in practice. This dissertation is based on the settlement of practical problem, deducing the framework of accounting policy choice under theoretic guidance, in order to settle the accounting policy choice problem in practical use.Principal views of the dissertation are as follows:An accounting choice is any decision whose primary purpose is to influence (either in form or substance) the output of the accounting system in a particular way, including not only financial statements prepared in accordance with GAAP, but also tax returns and regulatory filings. This kind of decision-making can be a long-term policy application from strategy aspect and also can be a kind of maneuver to decide the output of accounting information that can attain certain purpose from the short-term tactics aspect. There are broad sense accounting policy and narrow sense accounting policy, macro accounting policy and micro accounting policy as well. The factor that impacts the accounting policy choice primarily is the exterior environment, especially the economic environment. Of course, the different business itself is also an important factor. The reasons for accounting policy choice include objective and subjective aspect. The objective reasons are as follows: the uncertainty and the variety of measurement of the accounting object, the variety of accounting practice, the complexity of involved interest, the development of accounting standard being not synchronizing with the development of accounting practice, information asymmetry, and the public contractual characteristics ofaccounting standard, etc. The subjective reason is the interest motive. The accounting policy choice is the focus that each party pays attention to because it has economic consequences of accounting choice, and influences the interest distribution of stakeholders. The object of accounting policy choice is to maximize the interest of the stakeholders in the premise of the accounting object.Therefore, we specify three categories of goals or motivations for accounting choice: contracting, asset pricing, and influencing external parties. The first category of market imperfections stems from the presence of agency costs and the absence of complete markets (otherwise, one could solve the agency problem through state-contingent contracts). Accounting choice is determined to influence one or more of the firm's contractual arrangements. Such contractual arrangements include executive compensation agreements and debt covenants, the primary function of which is to alleviate agency costs by better aligning the incentives of the parties. However, depending on the structure of these contracts, ex post accounting choices may be made to increase compensation or to avoid covenant violation. In most situations, multiple accounting choices can be chosen singly or jointly to accomplish one or more goals. The second category of accounting choice, driven by information asymmetry, attempts to influence asset prices. The primary focus in this category is to overcome problems that arise when markets do not perfectly aggregate individually held information. Accounting choice may provide a mechanism by which better informed insiders can imp...