Study On Contractual Motivations Of Multiple Accounting Policy Choices

Accounting policy choice is one of the key fields in positive accounting theory research. With the contract theory, foreign scholars have made lots of fruitful studies in the field, which are mostly based on three hypotheses including Political Cost Hypothesis, Debt Contract Hypothesis and Pay Contract Hypothesis. But their researches mainly fastened on interpreting the choice of a single accounting policy. Comparing the multiple accounting policy choices enterprises own, the persuasion and applicability of these researches were limited. However, there are only a few national studies in this field, and even less positive studies. With the deep going of economic system reform, advancement of modern enterprise system and the establishment of capital market, it is not only possible but also necessary for Chinese enterprises to make better use of accounting policy choices.Based upon the above reasons, a study using the methods both of theoretic analysis and empirical testing has been made on contractual motivations of multiple accounting policy choices.In the paper, 239 listed companies, which had the voluntary accounting policy changes during 1998-2004, were chosen as samples. We use the Cross-sectional Modified Jones Model to separate discretionary accruals with which examining the eight contractual motivations as discretionary accruals reflect the influence of multiple accounting choices of a corporation on its profit. With the multivariate linear regression test, we find that: (i) Debt contract, pay contract, product durability, labor union chairman pluralized by managers and audited by top 10 accounting firms all have notable positive influence on enterprises'multiple accounting policy choices. It means that these enterprises are more inclined to choose multiple accounting policy to increase current profit; (ii) Enterprise's scale has notable negative influence on enterprises'multiple accounting policy choices, namely that these enterprises are more inclined to choose multiple accounting policy to delay current profit; (iii) The ratio of dividend distribution and the ratio of raw materials are not important effective factor when enterprises choosing multiple accounting policy.