Intertemporal Choice Theory, Short-sighted Behavior And Tendency Of Fraudulent Financial Reporting:Theoretical Analysis And Experimental Test

From a securities administrative punishment analysis report of China securities regulatory commission in2010, we can see that the CSRC received about107pieces of the committee case,67of which have been settled. From this report, we can judge that over50percent of accounting fraud is fraudulent financial reporting which includes information disclosure violations, false statements. It has become the main type of illegal securities activities. Through the manual collecting databases from RESSET, we obtained information of these listed company published by the CSRC from2006to2011. From the information we find that fraudulent financial reporting takes a high proportion in accounting fraud because five of the six years’percent are over50%. We also find that over60percent of the fraudulent financial reporting involves leaders of the listed company and some year’s percent even more than80%.It shows that this article has a profound significance in the research of listed companies’fraudulent financial reporting in China. Also, it shows important practical significance in the research of public companies’accounting frauds field.According to the penalty of China Securities Regulatory Commission (CSRC), we can see in spite of the fact that strengthen of supervision and punishment on fraudulent financial reporting, it can’t help stopping manager in listed company from committing accounting fraud. In order to find the reason, some researchers did some research on fraudulent financial reporting from different angle, such as the concept, motivation, characteristics and identification methods of fraudulent financial reporting and so on. On the basis of widely reading the previous related studies on fraudulent financial reporting, we aimed to study the fraud behavior of listed company’s managers with intertemporal choice theory of behavioral economics. With the aid of experimental research methods, we can find the fraud roots from the angle of fraud committers themselves. We aimed to conclude some effective methods in preventing or controlling fraudulent financial reporting.Through the penalties of CSRC and RESSET database, we summarized the methods of account frauds and did some statistics of the frequency of accounting frauds, from which we find the shortcomings of preventing or controlling fraudulent financial reporting of listed companies. Based on our work, we try to find the substantial reason of managers’ accounting fraud on the basis of some theories of intertemporal choice, such as cognitive biases, time discounting, time preferences and so on. We aim to put forward rational proposals of preventing or controlling fraudulent financial reporting to contribute to the establishment and improvement of the system in preventing fraudulent financial reporting.Chapter one introduces us the background, purpose, significance, basic idea, methods and the main contributions of the research. Chapter two is literature review, from which we can know clearly about the current state of the overseas and domestic research on accounting fraud.Chapter three gives us a definition of the accounting fraud and the related theory. Meanwhile, it briefly introduces us the features of accounting fraud and the relations between Fraudulent Financial Reporting and Intertemporal Choice.In chapter four, we analyze the short-sighted behavior theoretically. And, we can learn about what on earth leads to the short-sighted behavior of managers in listed company. This part also tells us the external factors that lead the managers to commit accounting fraud. On this basis, we put forward three hypotheses. Then, we try to test and verify the rationality of these hypotheses through experiment.Chapter five introduces the experiment design and the experimental course. In chapter six, we analyze the experiment data. On this basis, we conclude that Impatience is not the sufficient condition for a person to commit fraud, and only when facing some stimulating factors that listed company management with higher levels of impatience will show higher tendency to commit Fraudulent Financial Reporting. By the influence of cognitive deviation, the management that over-estimate their own cognitive ability are more likely to produce corrupt behavior. The management with high degree of loss aversion are with high levels of tendency to produce corrupt behavior. The accounting fraud behavior is the result of the interaction of comprehensive factors including internal and external factors; in certain circumstances, some supervision and administration policy towards listed company may induce accounting fraud; Well designed and conducted supervision and administration policy towards accounting fraud will increase the managers’ cognitive level of the risk of being punished for their committing fraud, therefore, accounting fraud are less likely to happen; reasonable goal of the company contributes to reducing the probability of accounting fraud.In chapter seven, by means of analyzing experimental results comprehensively, we aim to give suggestions on how to be more effective in preventing and governing the accounting fraud.