Research On The Impact Of Institutional Investors On The Enforcement Of Accounting Standards

As an important demand side of the financial information, investors will make relevant investment decisions based on the financial information that the listed companies disclosed. So all investors want the high quality financial information. High quality financial information is not only reasonable in the accounting standards making phase, but also need high quality enforcement of accounting standards. Good enforcement of accounting standards can avoid the shareholders with large proportion violating the shareholders with small proportion.China Securities Regulatory Commission made a proposal in 2000, which proposed that the institutional investors should be encouraged. This really help the institutional investors developed a lot. Nowadays, institutional investors are getting stronger and stronger, they have become an important role in the capital market. Within the investment target companies, institutional investors are getting involved in the operation and management. There were some examples about institutional investors influence the important decisions about the target companies At these kind of scenario, Whether institutional investors can affect the enforcement of accounting standards and how they affect that have become a problem which make public pay attention to.This paper goes through the previous articles and research based on the institutional investors’ influence on control of earnings and corporate governance, and refining the different levels of institutional investors’ influence on the enforcement of accounting standards. At the same time, this paper clarifies the relevant theories including the Principle Agent theory and Information Asymmetry theory.This paper classifies the institutional investors into shareholder activism and shareholder passivism. Shareholder activism institutional investors is a part of the external governance mechanism, they affect and monitor the enforcement of accounting standards by corporate governance and external monitoring. While shareholder passivism institutional investors more concentrate on the speculative value of the companies. And they have no willing to monitoring the enforcement of accounting standards and they would rather make a conspiracy with an internal make to control the enforcement of accounting standards.This paper, by cases, introduce institutional investors influence on the enforcement of accounting standards, analysis whether they are shareholder activism investors or shareholder passivism investors and how they influence the enforcement of accounting standards. From this case, the paper concludes several problems that commonly existed in our institutional investors and make some suggestions from three angles, which include the institutional investors, target companies and the government, in order to make a positive affection to let the institutional investors affect the enforcement of accounting standards in a good way.