Institutional Environment, Institutional Change And Decision Usefulness

As the objective of current financial reporting, decision usefulness perspective refers to "financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions", although there are many users about the financial accounting information, investors no doubt are the most important ones. Decision usefulness in this dissertation refers only to the decision usefulness of financial accounting information for shareholders, and clearly defining the scope of users will be helpful for better understanding the research topic of this dissertation. Securities market of China is an emerging market, and at the same time it is rooted in the Chinese economic transformation, and the dual nature of emerging and transformation leads to frequent institutional changes and oscillations. The accounting system as an important component of economic institutions has experienced several major changes, and how to understand the economic consequences of the changes in the accounting system has always been emphasized and paid attention to by the theoretical, practical researchers, and the regulators. An in-depth study on the economic consequences of the institutional changes of accounting has an important theoretical and practical significance to evaluate the securities market regulatory policies and test the theories related to economic institutional changes.The new institutional economics always emphasizes the decisive influence of institutions on the contract structures, and attaches importance to the impacts of institutional environment on the institutions' operating efficiency. The background of the institutional changes in the China's economic transformation and emerging capital market has provided a rare research opportunity on testing the proposition about the impacts of institutional environment on the institutions' operating efficiency. Based on the research framework of country-specific differences about the school of "Law and Finance", the research of domestic inter-regional differences in the institutional environment can overcome the limitations that country-specific capital markets' operating mechanism and the effectiveness can not be comparable, and can also control the influence of the informal institutional arrangements on the operating efficiency of the institutions. Therefore, a major concern of this dissertation is that how the domestic inter-regional differences in the institutional environment influence the operating efficiency of the accounting system.Drawing on the basis of the literatures at home and abroad and considering the practice of Chinese Listed Companies, this dissertation analyses and examines whether the decision usefulness of accounting information has been dually influenced by institutional environment and institutional change, and then uses the empirical research methods of value relevance and earnings informativeness to measure the decision usefulness of accounting information. This dissertation deeply explores the economic consequences of the accounting system's change, and uses the theories of behavioral psychology, economics, finance to explain and analyse the empirical results that how the institutional environment and institutional change affect the decision usefulness of accounting information. The exploration of this proposition not only provides new scientific evidence and theoretical support about whether accounting system change has enhanced the decision usefulness of accounting information, but also has great theoretical and practical value for understanding and attaching importance to the impact of domestic inter-regional differences in the institutional environment on changes in accounting system, as well as for evaluating the economic consequences of institutional change, such as the accounting rules reform and the split share structure reform.This dissertation is divided into eight chapters, and the contents of each chapter are as follows:Chapter 1 is the introduction, which briefly introduces the research background and issues, research ideas and contents, research improvements and innovations.Chapter2 is the literature review. In this chapter, the author reviews and comments the empirical research on the decision usefulness of accounting information, the relationship between institutional environment and financial accounting information.Chapter3 analyses the institutional background of the accounting reform and divides the accounting reform into three main periods since China's securities market establishment based on the main line of the institutional change.Chapter4 examines the relations among the institutional environment, mandatory institutional changes in accounting and the decision usefulness of accounting information. Based on accounting reforms in the dominant periods of accounting regulations and the empirical models of decision usefulness, this chapter explores the influence of the institutional environment on the changes of accounting regulations.Chapter5 examines the relations between the induced institutional change of domestic inter-regional institutional environment and the decision usefulness of accounting information. Using the sample companies during the period of stable accounting system to control the impact of changes in accounting system, this chapter investigates how the improvement of institutional environment affects the decision usefulness of accounting information. Chapter6 studies how the institutional environment and the split share structure reform affect the decision usefulness of accounting information. This chapter through the empirical models of the decision usefulness tests the process and the consideration of the split share structure reform how to affect the decision usefulness, and then further tests the role of the institutional environment in these two studies.Chapter7 examines the relations among the institutional environment, dual mandatory institutional changes and decision usefulness. Based on the listed companies that have completed the split share structure reform, this chapter investigates how the institutional environment, the consideration of the split share structure reform, and the coupling of these two factors affect the institutional change of accounting respectively.Chapter8 summarizes the research findings of this dissertation, and reports the implications we learn, the caveats about this research, and points out the direction for further research.In this dissertation, the main conclusions are as follows:1. The mandatory institutional changes in accounting such as the "Accounting Regulations for Listed Companies", "Accounting Regulations for Business Enterprises" have affected the decision usefulness of accounting information, but the directions of the impacts are not consistent. Regional institutional environment has exacerbated the effects of mandatory institutional change in accounting, and the "Consequence Hypothesis" and the "Substitute Hypothesis" about investor protection to some extent have been supported.2. The induced institutional changes of regional institutional environment have affected the decision usefulness of accounting information, in other words, with the improvement of the regional institutional environment, the decision usefulness of accounting information have increased to some extent. The results suggest that when we are engaged in the research of accounting and financial issues about China's securities market, the potential impacts of the induced institutional changes of regional institutional environment cannot be ignored.3. The process and the consideration of the split share structure reform to some extent have affected the decision usefulness of accounting information, and regional institutional environment has exacerbated these impacts of the split share structure reform. That is to say, internal and external enforcement mechanisms of accounting rules jointly play a role in decision usefulness.4. The consequences of new accounting standards change in 2007 have been affected by independent or coupled effects of the institutional environment and the consideration of the split share structure reform. The results suggest that the independent or coupled effects have affected the accounting standards change, in the mean time, the "corporate governance premium" theory, the "Consequence Hypothesis" and the "Substitute Hypothesis" about investor protection to some extent have been supported.This research has certain exploratory property, and major improvements and innovations are in the following aspects:First, in terms of the research contents, from the actual situation of domestic inter-regional differences in the institutional environment, for the first time, this paper uses the institutional analysis tools such as the marketlization index to evaluate the economic consequences of accounting system changes, and this paper has provided new scientific evidence and theoretical support about how the accounting system change affects the decision usefulness of accounting information.Second, in terms of the research framework, this paper has introduced the research ideas of induced institutional change in the new institutional economics, after the in-depth analysis of the institutional environment variables, for the first time, based on the theory of induced institutional change, this paper investigates how the induced institutional change of regional institutional environment affects the decision usefulness of accounting information, and then provides an important theoretical basis on why to accelerate the improvement of regional institutional environment.Third, based on the institutional background of China's split share structure reform, for the first time, this paper combines the institutional environment with the split share structure reform to jointly examine the economic consequences of the accounting information decision usefulness, which provides fresh ideas and methods to investigate how the internal and external enforcement mechanisms of accounting rules jointly play a role in the quality of accounting information.Fourth, based on the hot issues of China's new accounting standards changes, for the first time, this paper investigates how the regional institutional environment, the split share structure reform and the accounting standards changes have affected the decision usefulness of accounting information, which enriches the economic consequences research of accounting information about the split share structure reform.