Study Of The Effect Of Audit Committee Governance From The Perspective Of Non-cooperative Game

Audit committee plays an important role on the modern enterprise mechanism of corporate governance. It is essentially a remedial measure that solves the agency problems due to the separation of corporate ownership and management rights. To a certain extent, audit committee could ease the information asymmetry case between investors and managers. It also plays an active role on the situations such as combating financial fraud and conspiracy issues, ensuring the reliability of information, maintaining the level of shareholders' equity, etc. And thus audit committee could help safeguard the normal operation and development of the capital market.In practice, with the expansion of the scale of accounting firms and the enhancement of the social reputation of Certified Public Accountants who are considered as the independent third party, people gradually tend to trust the supervisory power outside the company. However, from 2001 to 2002, some American companies continually broke financial fraud scandals, such as the events about Enron, WorldCom and Merck. While the similar financial fraud issues also inevitably happened in China's capital market, such as Joan source, red light industrial, Yutong bus, Yinguangxia events and others. All these ensuing financial fraud events show that the Certified Public Accountants are difficult to maintain the objective and independence even as independent third party. To achieve the aims to discover and correct the issues in essence, the source of the problem must be considered firstly, which is internal part of the company. Similarly, with the gradual establishment and development of market economy, the capital markets become more mature and more public for the people since China started to reform and open up. In order to protect the vital interests of investors better and make up the place which the board of supervisors lacks in corporate governance, people gradually shift perspective from the outside supervisory power to the internal governance structure. Therefore the audit committee is re-focused by people which is considered as a powerful tool for maintaining and ensuring the quality of information transmission. As the practical history of the audit committee in our country is not long, most of the relevant normal academic researches are about the introduction of foreign literature or the theory based on the perspective of financial management. A lot of these researches are based on the social status of the institutions, analyzing what the audit committee should do, but not what the audit committee is actually willing to do on the basic of economic identity. Thus this paper uses specification writing method, assuming people are limited rational as a starting point. The paper mainly focuses on the interaction of different people who take part into the game, analyzing what problems the audit committee exists and how to solve them in order to maximizing the payoffs for people to take.This.paper is divided into six parts:the first part is the introduction, introducing the background for choosing this topic, research purpose and meaning, the selected research methods, the related literature review summarizes and comments, and analysis ideas and frameworks icon; The second part is the basic theory part as the bedding of the latter part of the paper, which specifically includes the following contents:the overview of game theory and the magical reasoning aspect for conveniently research on reality; The third part is based on the different ownership concentration, analyzing governance motivation and needs of audit committee under different mode of governance through two simple game models, in order to further pointing out that the governance aims of audit committee in China is needed to be re-positioned which is a little different from the foreign-oriented goals; The fourth part is theoretical analysis. In this part, various models in non-cooperative game theory are used to further analyze two types of enterprises which are distinguished by the former part, providing the theoretical basis for the following policy proposals; The fifth part is the policy proposals mainly discussing the methods and recommendations that could improve the effectiveness of audit committee according to the analysis in the third part; The last part is to sum up the whole paper, it also includes the limitations of this paper and the research issues and directions which would be continually studied in future life.