Comparative Study Of The Sino-us Holders Accounting Methods

In review of Chinese stock market history, more frequent and much larger stock distributions are found to have happened in China than that in west countries. And, compared with GAAP of USA, Chinese accounting principles for stock distribution are much simpler and less of restriction. Are there close links between the frequent and large stock distributions and the Chinese simple accounting principles? With this question, the relevant rules about stock distribution and its accounting treatment, both from China and from USA, are collected and compared in this paper. Then follows two steps of empirical research: First, the market reaction to stock distributions is watched by calculating the cumulative abnormal announcement period returns. It turns out that small and large stock distributions are favored by stockholders, but nor do middle size stock distributions. Such phenomena are partly impacted by the simple accounting rules of stock distribution, which promotes the further study about the accounting principles. Second, adjustment method is used in empirical research for accounting principles' influences. If the stock distributions were accounted for as GAAP rules, there wouldn't be so much frequent and large stock distributions by Chinese listed companies as before. In another words, the "simplicity" of Chinese accounting principles for stock distribution is a very important reason that leaves a firm much more free to distribute new stocks. Therefore, Chinese accounting principles for stock distribution should be revised.