Empirical Study On Bounded Rationality And Assets Impairment

The financial crisis of 2008 wound not only lead to the diminishing of financial assets and long-term equity investment,but also the impairment measurement problem of inventories and accounts receivables. In the assets impairment test, professional judgment of accountants has been relied on more frequently. Some scholars had pointed out that the assets impairment has a tremendous impact on the enterprise's finance affairs. Sometimes, the amount achieves 22% of sales revenue, 12% of the total long-term assets, about 10 times of profits. This also explains why companies so concerned about the impairment of assets, and why regulators attached so much importance to asset impairment accounting information.Firstly, modern property rights theory was used to analyze corporate ownership and accounting information disclosure regulation. However, because of the limited information processing capacity and the module division of human brain, the brain will engender multiple identities. Thus constitution and implementation of regulations are limited rational. Based on the nature of assets, this paper analyzes the content of assets impairment. It was educed that the fact of asset impairment is the exhibition of confirmation of assets'future changes and the difference between the different measurement attributes.Secondly, this paper studied the motivation of regularity bounded rationality of assets impairment, and selected non-finance listed companies in security market from 2005 to 2007 as samples to test difference between the accrued amounts and ending balances for impairment assets not to be transferred during the three years. The results show the regularity of bounded rationality dues to the relativity of bounded rationality and limited knowledge of the rule makers, environmental uncertainty and cost constraint of institution constitution. Through the study on the scope, extent and amount of assets impairment calculation from 2005 to 2007, it has shown that bad debts and inventory Impairment are always the top two in the scope of calculation. The accrual amount and balance of impairment-transferable assets is far greater than the amount of impairment to be not transferred assets. The accrual amount and balance of impairment to be not transferred assets in 2006 does not differs remarkably between the whole sample and industrial sample from 2005 and 2007.Thirdly, this paper studied the motivation of technically bounded rationality of assets impairment, and analyzed the correction notice published by limited companies from 2004 to 2008, indicated that technically bounded rationality was mainly due to negligence and excessive self-confidence. It is clearly put forward that the technically bounded rationality is classified as negligent bounded rationality and non-negligent bounded rationality in the process of the accounting professional judgment. From 2004 to 2008, through taking correction notices in " listed companies database" as an example, the paper analyzed the reasons for enterprises published a correction notice.Finally, the paper studied the motivation and influence factors of behavioral bounded rationality. Behavioral bounded rationality is due to the motivation of operators in their pursuing their own interests, lax supervision and inadequate penalties. In this paper, listed companies were selected as samples from 2004 to 2008. It was found that about 37.20% of the companies got out of line time and again, about 17.77% of the companies got out of line and be punished again after one year. The study also found that 80.52% of companies were punished again, who were punished lesser for the first time. Consequently, supervision and punishment should be strengthened. Studies indicated that there are significant differences between avoiding-loss companies and micro-loss companies. There are significant differences when the management changes. Moreover, there is no evidence to prove the operators'making use of assets impairment when companies increase issues in stocks. The study results indicate that there are significant positive correlation between return on assets(ROA), return on equity(ROE) and the accrued amount of assets impairment.There are significant correlation between ROA, ROE and audit opinion, with uncertain directions. And there is significant negative correlation between ROA, ROE and total asset value, which proves the political cost hypothesis does not hold true in China. The assets liabilities ratio is proved to reduce assets impairment significantly, but not so significantly in each year. In the study, the regression results revealed significant difference between the population and any other industries except manufacturing industry, which has a closer result with population.On the basis of above research, this paper put forward the corresponding policy recommendations. There should be adequately game in order to reduce the regularity bounded rationality. Accountants'education should be enhanced in order to reduce the technical bounded rationality. And there should be a well-regulated supervision in order to reduce the behavioral bounded rationality.