Empirical Research On Accounting Choice

The goal of accounting theory is to explain and predict accounting practice (Watts and Zimmerman,1986), and the accounting theory is dealing with the accounting choice issue (Christensen and Demski,2003). Although the western has studied the corporate accounting choice in the early, they are still facing many problems and challenges. For our part, due to the development of market economy and the capital market lately, the implementation of accounting standards are issued for more than ten years, and the theory and practice of accounting choice is only in recent years. However, along with the reform of corporation and the development of the capital market, to build high-quality accounting standards at the core of the accounting reform, the company has the larger right to choose. The accounting choice issue has become an important issue in the theory and practice of accounting. According to our accounting choice framework, this paper analyzes three aspects of the accounting choice, and draws some useful conclusions.From the research perspective, this paper can be divided into six chapters, as follows.Chapter 1 is an introduction, which gives the main question to study, analyzes accounting choice and related concepts, and outlines the arrangements for the content of the paper.Chapter 2 is the basic problems of accounting choice and a review of relevant literature. The chapter builds a research framework of the accounting choice from the perspectives of the criminal investigation, reviews the latest papers at home and abroad in recent years, and specifies future researches in the right direction.Chapter 3 is to detect accounting choice. The chapter focuses on the fourth quarter, because the fourth quarter affords managers the last opportunity during the year to achieve profitability and to obtain the most information about the amount of earnings needed to meet their targets. Therefore, an examination of the change in a firm's cumulative earnings distribution over the fourth quarter, which is the change in cumulative earnings between the end of the third quarter and the end of the fourth quarter, can yield insights into how managers use their discretion in reporting earnings. As expected, the paper finds that the kink becomes more pronounced during the fourth quarter. Specifically, firms in the smallest loss interval by the end of the third quarter shift at a higher rate, and firms in the smallest cumulative three-quarter profit interval remain in the smallest annual profit interval at a higher. These abnormal movements contribute to a higher than-normal frequency of observations in the smallest annual profit interval and a lower than-normal frequency of observations in the smallest annual loss interval, and hence contribute to the kink. The research has important implications for monitoring practice as well. The results indicate that regulators should ex ante supervises firms closest to the profitability threshold after three quarters。Chapter 4 analyzes the real accounting choices. Methods of accounting choice usually can be divided into two categories, the accrual and the real activities which have an impact on cash flow. The former directly manages accruals, which don't affect cash flow, such as the amount of assets impairment, the choice of accounting methods, and so on. Of course, in order to meet the goal, there are also incentives of real activities management, which often will affect the corporate cash flow. At present, the general view is that the cost of accounting choice differs across these methods, with real accounting choice generally considered to be more costly for the firm. However, it contradicts with the survey evidence that managers are much more willing to engage in real accounting choice. And, so far the majority of the accounting choice literature often only studies abnormal accruals for concern, and direct examination of the real accounting choice is very little, but also largely focused on investment activities, such as reducing the expenditures of research and development. Therefore, the real accounting choice research is necessary from many aspects, and this chapter is from the three aspects of operating cash flow, production costs and discretionary expenditures to provide the evidence.Chapter 5 investigates relations between accounting choice and corporate governance. Through the front sections of the analysis, this paper had discovered the existence of real accounting choice, a very natural question is how the supervise these accounting choices. This chapter finds that the proportion of shares held by institutional investors, board size and accounting choice have an significantly negative relationship. This shows that, the increase of shares held by institutional investors and board size can indeed reduce the extent of accounting choices. Chapter 6 is the conclusion. This chapter summarizes the main research findings, and further points out that this study has limitations and future research directions.In short, according to the framework of accounting choice constructed, the paper investigates whether accounting choice occurred, real accounting choice and corporate governance oversights of accounting choice, and finds a number of interesting conclusions, wishing to help the accounting theory and accounting choice theory in the future.