Research On The Motivation And Economic Consequences Of Accounting Choice Changes

According to the contract theory, accounting standard is essentially the contract which is agreed by government and enterprise on accounting policy and method. However, due to the complexity and diversity of economic business, uncertainty in the economic environment, and many other reasons, the contract can’t cover the accounting policies and methods of each specific economic business, it’s not complete. So the enterprise can choose their accounting policies and methods. This choice was to enable the enterprises to more truly reflect the financial position, operating results and cash flows. But in practice, this option has become to management tools to manage their earnings and safeguard their own interests, this kind of legitimate unreasonable accounting choice behavior affects the investors to make correct economic decision. Compared to the initial accounting choice and mandatory accounting changes, voluntary accounting changes are particularly prominent, including the spontaneous changes of accounting policies and accounting estimates. The motivation and economic consequences of the change is worth to ponder.This article adopts the research method by combining case study and theory analysis, regards China shipping development as a case study, which is changed in accounting policies and accounting estimates, bases on the contract theory, agency theory, rent-seeking theory and the economic consequences theory, and then reveals the motivation and economic consequences why the listed companies change accounting choice in China.The research found that the listed companies have specific reasons to change accounting choice in China, mainly including earnings management, executive compensation, and financing pilot. When the business performance declines and financial position deteriorates, in order to make up deficits and financing, accounting changes become the means by which a listed company manages their earnings and reach the listed "bright line standards", and the tools by which the financing is satisfied and the financial situation is improved. In addition, the executive’s emolument in listed companies is often linked to business performance, so handling business performance and seeking their own interests has become one of the motivations of accounting changes.In the economic consequences, accounting choice changes have not only a profound impact on their own financial status, operating results and taxation, but also influence the investors, creditors, government and other stakeholders to make economic decision, and affect the healthy development and good operation of the securities market. Due to the existence of information asymmetry between the external stakeholders and management, and information disclosure has lagged behind, the external stakeholders are difficult to make correct economic decision, securities market is also difficult to timely and effectively respond to accounting choice changes.Because market supervision system is not perfect in our country, the unreasonable accounting choice changes seriously affect the reliability of financial statements, and while the external stakeholders make economic decisions on the basis of the financial statements, they should clarify the essence motivation of accounting choice changes and be not fooled by the illusion. Therefore, to standardize the information disclosure mechanism of accounting choice changes, to strengthen the external audit supervision, to pay attention to the long-term development of enterprises, to improve the regulatory system of securities market, will be important to regulate the listed companies to change accounting choices.