Definition, Measurement And Empirical Application Of Transaction Cost

Transaction cost has always been a theoretical issue of great concern and efforts of economists. The result of these studies, to some extent, reflects the continuous development and innovation process of cost theory. Professor Ronald Coase in"Nature of enterprise"1937 put forward the concept of"transaction cost". Since 1970s, Doc. Williamson, Klein, Alchian and other scholars developed cost theory and make it operable in analysis process. The development of transaction cost theory leveled up our understanding of enterprises'nature, which also give us a deductive of company scale and border, Acts of vertical integration, corporate internal structure .etc. Economics, as the cornerstones of modern accounting, has an obvious impact on accounting. The innovation of Western economics cost theory has provided a broad space and driven force for modern management accounting research. One mission of accounting is to integrate the innovational economic theory into business analysis process and transfer it into measurable economic matter, which is tough but of significance. In this sense, we believe it has great theoretical value to research the manifestations, measurement and application of transaction cost in the environment of micro-enterprise.Although transaction cost theory has strong explanatory power, and new institutional economist apply it into the process of institution system research and explored new research area, its application in empirical research is rare. The development of theory needs the support of empirical result. Doc. Williamson analyzed different governance choice by transaction cost theory. He emphasized that governance structure should match with transaction type, which was aimed to save transaction cost. We start our empirical research from the entry point of transaction cost and governance structure to test their relationship. In pace with economic globalization and the growing of equity doctrine, corporate governance structure has turned into important content of enterprise research. The core of governance structure is to Guarantee good decision making and performance. A sound corporate governance structure will be one of the key successful factors of future economic and finance reform, sustainable development of stock market and modern enterprise department to meet future challenges. Economists use transaction cost as the selection criteria of corporate governance, which would benefit us from improving and enriching corporate governance theory and guiding our practice. Thus, the choice of corporate governance structure as the entry point of transaction cost empirical research is of practical significance.This article includes two major parts. The first part includes chapters I and II, which aimed to build a platform for theoretical research. The second part includes the third, fourth, fifth chapters, which aimed to construct the analyzing framework of transaction cost accounting, further more to discuss its definition, measurement and application. In addition to the introduction part of this paper which introduced the topic background, research purpose and significance, methodology, there are five chapters that detailed the empirical research.Chapter one"literature review of transaction cost"introduced domestic and oversea literature describing the content, measurement and application of transaction cost, which worked as the guidance to our research. Firstly, we analyzed the common understanding of different economists based on the content of transaction cost, which forms the conceptual framework of this article. Secondly, transaction cost is measured by multi-dimension (including macro economic entity and micro-enterprise activities) and multi-angle (including absolute terms and relative terms). Thus we constructed different measuring ways for different manifestations of transaction cost. Finally, due to lack of empirical research on transaction cost, combined with Doc. Williamson's analysis, we stated that our entry point was transaction cost and corporate governance.In chapter two,"transaction cost, efficiency and systematic selection", our research focused on two point, firstly we detailed the "human assumption" in transaction cost theory; secondly, based on the entry point of empirical research we discussed in chapter one, we set the transaction cost as the criteria of system selection and made detail analysis of the relationship between transaction cost and corporate governance, which formed a theoretical basis for further research.In chapter three,"defining transaction cost: explanation in accounting", discussed the definition of transaction cost in accounting. Section I started from the basic concepts to trace to the meaning of "transaction" and "cost"; Section II is focused on the necessity of introducing "transaction cost" into accounting and the content of "transaction costs". Then we classified transaction cost by different criteria to serve our decision making process.In chapter four,"measuring transaction cost: theoretical analysis and empirical evidence", firstly we analyzed the necessity, difficulty and feasibility of measuring transaction cost; secondly we focused on the accounting measuring methods, which was determined by the nature of different transaction activities and management purposes. Due to its multi-manifestation of both dominant and hidden cost, we should measure it by both monetary and non-monetary terms. For the non-monetary hidden costs, we established criteria including timing to make comparison and analysis. Referring to specific method, we take cost and benefit into consideration and established measuring index for"transaction efficiency". Then we calculated the efficiency figure of listed companies. For comparison purpose, we divided listed companies into two kinds, State-controlled holding and non-state-owned holding. According to our calculation, the transaction efficiency of state-controlled companies is better than non-state-owned holdings, also we made proper explanation for the discrepancy.In chapter five,"research on the relationship between transaction efficiency and governance structure", we made detail empirical test and analysis on different variables and its impact on listed companies'transaction efficiency, based on which we figured out the reason for non-state-owned holdings'low transaction efficiency. In section one we reviewed literatures about corporate governance and company performance; in section two we defined our research parameters including research hypothesis, variables, samples selection .etc; in section three our empirical analysis mainly include descriptive statistics analysis and testing conclusions, which are focused on four aspects including equity governance, debtor governance, board governance and management incentive.This paper attempts to make following innovations:First, we systematically discussed the application of transaction cost concept in accounting area, trying to build and improve the framework of micro enterprise transaction cost. Based on domestic and abroad results and local enterprise practice, we attempted to solve the problem of transaction cost definition, measurement and application.Second, based on our understanding of transaction and cost definition, we differentiated transaction types in companies to generalize the content and Manifestation of transaction cost.Third, we tried to make breakthrough of existing literatures to build a measuring system which integrate monetary and non monetary measurement, absolute terms and relative terms.Forth, we analyzed the effectiveness of corporate governance form the viewpoint of transaction efficiency, further we tested the relationship between corporate governance variables and transaction efficiency, which would enrich the content of transaction cost empirical research and provided an accurate and valuable empirical evidence for listed companies to improve their corporate governance.