Research On The Effect Of Fair Value Accounting On Corporation Investment Behavior Alienation And The Design Of Managers' Incentive Contract

On February 15,2006, Chinese ministry of finance issues New Enterprise Accounting Principle, Which is most highlighted by the practice of fair value. In the very act of carrying out New Enterprise Accounting Principle by Chinese Accounting Circles, the serious financial crisis breaks out in America on the other shore of ocean, and so the tremendous controversy on Fair Value Accounting Principle happens, What it involve and impact are strange since 50 years of bringing forward Fair Value Accounting Principle and putting it in practice by American Accounting Circles. In despite of this controversy abeyance finally by moderate concession of Financial Accounting Standards Board and declaration of American Securities Regulatory Commission, but it doesn't end off. So under the background of international financial crisis, studying and thinking of enterprise's behavior change after the actualization of Fair Value Accounting Principle, is a theoretic and practical problem exacting to be resolved by financing and Accounting Circles.Based on the above mentioned reason, in order to offer theoretic support and policy suggestions for perfecting Fair Value Accounting Principle, restraining corporation behavior alienation and improving the design of incentive contract,from the clue on irrationality, fair value accounting police choice, corporation investment behavior alienation and the design of managers'incentive contract are discussed by canonical method in this paper. It is divided into nine parts altogether.Chapter 1 is introduction. First, It proposes the theoretic value and the practical meaning of the research, then it introduces the contents, architecture and defines the basic concept, and the analytical prerequisite for the following research, finally it offers the theory foreshadowing and the analytical prerequisite for the following research.Chapter 2 is review of literatures. Interrelated literature on the practice of fair value, corporation investment behavior and the design of incentive contract are reviewed briefly, offering the research foundation and background for the following research.Chapter 3 is theoretic foundation. Based on the introduction and review of enterprise contract theory, behavioral corporate finance theory and corporate governance theory, the relationship among above mentioned theories, the practice of fair value, investment behavior alienation and the design of managers'incentive contract were discussed. Chapter 4 is method foundation. In this part, evolutionary games theory is firstly introduced to analyze feasibility of applying to research accounting police choice, principal-agent theory is firstly introduced to discuss the relationship between it and the design of managers'incentive contract, and signaling game theory is recommended to study the signaling function of accounting police choice. Such this offers method support for the research on fair value accounting police choice and the design of managers'incentive contract.Chapter 5 is the analysis of fair value accounting police choice. In this part, from the clue on rationality, Whether the choice standpoint of Chinese listed companies'fair value accounting police is rational is analyzed, then from the angle of bounded rationality, the choice standpoint of Chinese listed companies'fair value accounting police is discussed by polymorphic population model of evolutionary games theory.Chapter 6 is the study on the effect of fair value accounting on corporation investment behavior alienation. Based on the review on run limitation of fair value, the effect of fair value accounting on the over- optimism or over- pessimism of irrational managers and investors is discussed, then form the clue on irrational managers and investors, the effect of fair value accounting on corporation investment behavior alienation is analyzed by behavioral corporate finance theory.Chapter 7 is the study on the effect of fair value accounting on the design of managers'incentive contract. After listed companies introduce Fair Value Accounting Principle,their business earnings are codetermined by managers'effort and the change of fair value, traditional principal-agent model is extended, and the static compare the designs of managers'incentive contract between including sound value flexible loss and profit and not-including them is made, so the effect of sound value flexible loss and profit on the design of managers'incentive contract is analyzed.Chapter 8 is some policy suggestions. Based on summarizing the inspiration of the positive study conclusions of above every part and proceeded with consummating accounting institutions, securities business'evolution and corporate governance, policy proposals of how to consummate Fair Value Accounting Principle, restrain corporation investment behavior alienation and improve the design of managers'incentive contract are put forward.Chapter 9 is conclusion. The primary conclusions of the above every part are summarized, my view on the limitation of the thesis and direction studied further in the future are brought forward. Based on combination of correlative researches, form the aspect of irrationality, established in the practice of fair value, the following contents are the main innovation points in this paper:â‘ The fair value accounting choices of Chinese real estates listed companies are bounded rationality, and there is remarkable tendency.Which accounting police is chosen ultimately, lies on the compare between the sum of benefit of high quality listed companies and low quality listed companies adopting same accounting police and it of high quality listed companies and low quality listed companies adopting different accounting police.â‘¡After the fair value accounting rule is adopted by listed companies, when the market is expected to rise, irrational managers and investors are more optimistic about corporation'foreground,the probability of over- investment is more, corporation investment behavior alienation is more serious, but when the market is expected to fall, irrational managers and investors are more pessimistic about corporation'foreground, the probability of under- investment is more.â‘¢After the fair value accounting rule is adopted by listed companies, when the mean of sound value flexible loss and profit estimated by managers and it estimated by investors are the same, there are not the difference between the effect of design of managers'incentive contract which include sound value flexible loss and profit and it which does not include sound value flexible loss and profit. When the mean of sound value flexible loss and profit estimated by managers and it estimated by investors are not the same, there are difference between the effect of design of managers'incentive contract which include sound value flexible loss and profit and it which does not include sound value flexible loss and profit.