Corporate Governance And Accounting Information Distortion

Accounting information, which is also known as the feedback of systematic accounting information, refers to the gathering of information about business operations in a systematic, complete, accurate and timely manner by collecting all the relevant accounting bills and documents, which are further processed by accounting professionals. The gathered and processed information and data of various kinds should be a real and true reflector of the economic activities and business performance of a particular corporate entity. Modern capital market in essence is a market of accounting information. The accounting information of listed companies which becomes available through public disclosure appears on the capital market in the form of "common commodity", is an important prerequisite for it to serve as a guide to capital flow and resources allocation. But because of the uneven access to and possession of information by different marketers, medium and small investors are a disadvantaged group in comparison with big share holders and corporate management representing the interests of big share holders. Investors and prospective investors' faith in the capital markets and in listed companies depends very much on the authenticity of accounting information made public by listed companies. Meanwhile, false accounting information will under some circumstances seriously damage the interest of general investors and particularly that of medium and small investors.After more than ten years development, several thousand listed companies and tens of millions of investors constitute the present-day Chinese capital market with a total capitalized value exceeding RBM 4 trillion yuan. Yet, in recent years, the market has witnessed, not infrequently, the law- and regulation-breaking offences of disclosure of untrue accounting information by listed companies such as Hainan Energy, Hongguang Industries, Zhengzhou Dept Store, Liantian Stock, Yinchuan Guangxia, etc., to name some serious cases, seriously hindering the healthy development of the capital market and damaging the rights and interests of investors. It should be pointed out that the scandals have much to do with the existing unsound structure anddiscipline of corporate governance.As the poor corporate governance is the main cause for disclosure of fake or inaccurate accounting information, a core issue for the reform and development of China's capital market is how to improve continuously the governance regime of listed companies. At present, in terms of corporate governance regime, the listed companies in China are characterized by disproportional concentration of shares in the hands of a single share holder; the incomplete separation between the holding share owners and the listed companies leading to the manipulation by insiders as a result of absence or non-performance of the representative of state-owned shares; irregular and non-standard behaviour of board of directors as directs fail to act in good faith and to fulfill their obligations; board of supervision's failure to do what it is supposed to do; and by lack of standard incentive and self-discipline system on the part of management. The thesis tries to analyse the defects and weaknesses in the corporate governance regime of China's listed companies. What is more, it tries to seek some plausible strategies to rectify the malpractice of untrue disclosure of accounting information by improving the governance structural measures and system of Chinese listed companies.