Economical Analysis Of Accounting Policy Choice

The index of stock market dropped to the bottom together with the confidence of stock-holders.These due to the poor behaviors of listed companies .They use their favorite accounting policies to manage earnings, manipulate profit. At present, these wrong-doings include choosing accounting policies without following the accounting guidelines and accounting principles, changing accounting policies casually. The basic reason for these is because of the economic consequences of accounting policy choice.Other scholars have done many valuable researches in this field. But they do not have systemic summarization and have little relationship with current situations. The purpose of this paper is analyzing the reason of mal-choosing of accounting policies and put forward suggestions to curb this trend. Using Institutional Economics, Property Rights Economics, Contract Economics as its tools, the paper find the reasons lying behind mal-choosing of accounting policies. They are as follows .Our accounting guidelines and principles lack full game-playing. The wrong-doers did not have enough punishment. There is little internal control in the industry and in the companies. Most of share of our listed companies are mainly owned by the state and cannot be bought and sold. So other stock-holders have nearly no substantial rights in these companies. Contracts do not work well due to our peculiar characteristics. These researches lay a sound foundation for the following chapter. From perspective of Game Theory, this paper analyzes the relationships among managers, stock-holders, authorities, debtors, CPAs, and managers in other companies. They mutually lead to the choices of the company. In the final part, the paper advances many valuable suggestions on adjustment of accounting guidelines, improvement of corporate governance and internal control and so on.