Study On Contractual Motivations Of Multiple Accounting Policy Choices In China

Accounting policy choice is one of the key fields in west accounting and capital market research. Recently, foreign scholars have made lots of studies in motivations of accounting policy choices and real effect in listed companies, and as a result, positive accounting theory is built. Though, most researches mainly fastened on interpreting the choice of a single accounting policy, the persuasion and applicability of these researches were limited. There are few studies in this field in China. However, with the deep going of economic system and advancement of modern enterprise system reform, the outside circumstance and inside motivations have been coming into existence for accounting policy choices in Chinese listed companies. Besides, the using of new accounting standard in listed companies will make huge impact on their accounting policy choices.Based on the contract theory and the fruits of scholars abroad and inside for reference, this paper using the methods both of theoretic analysis and empirical testing has been made on contractual motivations of multiple accounting policy choices. Firstly, this paper briefs accounting policy choices, including its definition, types, new target under new accounting standard and the relation among accounting policy choices, earnings management and accounting policy manipulate. Secondly, this paper analyses the impact on the accounting policy choices in listed companies from Pay Contract Hypothesis, Debt Contract Hypothesis, Political Cost Hypothesis, Ownership Concentration Hypothesis, Investment Opportunity set Hypothesis and Assets-in-Place Hypothesis. Finally, 97 manufacturing listed companies, which had the voluntary accounting policy changes in 2005, were chosen as samples to test the validities of above 6 hypotheses in China. With the multivariate linear regression test, we find that: (i) Pay Contract and Investment Opportunity set have notable positive influence on enterprises' multiple accounting policy choices, as our anticipation, (ii) Political Cost Hypothesis and Ownership Concentration Hypothesis have notable positive influence on enterprises' multiple accounting policy choices, reversing our anticipation, because of Chinese special economy and politics circumstance. (iii)Assets-in-Place Hypothesis reverses our anticipative sign. This suggests that ratios based on book values and market values have different impacts on management's choice of accounting policies, (iv) Debt Contract have some influence on enterprises' multiple accounting policy choices, but not very notable.