The Influence Of The Accounting Information Transparency On The Resource Allocation Efficiency

Accounting information, which is the basis for the effective operation of the capitalmarkets, reveals the enterprise’s economic activity, and can guide the flow of funds. Themore transparent of accounting information, the more effective the guide will be to leadthe cash flow to the enterprises with higher profitability, thus to improve the efficiencyof resource allocation. On the contrary, it will mislead the cash flow, and impede theefficiency of resource allocation. Therefore, the transparency of accounting informationplays an important role in the capital market, and it is the main basis whether listedcompanies will make the right business decisions or not, the basis whether investorswill make effective investment decisions, and the important basis whether regulatorswill implement the regulatory actions so as to promote the orderly operation of capitalmarkets. Particularly the case of Yinguangxia, the company concealed the quality, thequantity of its products and modified the price. The problem of the company is thecompany’s serious fraud of accounting information. Low transparency of accountinginformation and inflated profits finally generated the illusion that the company is withstrong profitability, which makes a lot of money flow from outside investors to the innercompany, resulting in the boom of stock prices. Put it in another way, capital flows tolow-profit enterprises, and hinders the efficiency of resources allocation. This casedemonstrates that the importance of transparency of accounting information on theefficiency of resource allocation. It is because of the opaque accounting informationresulting in low efficiency of resource allocation. So the studies on the impact oftransparency of accounting information on efficiency of resource allocation become thefocus of the academic community.Firstly, through the research on previous relevant references, the writer defined theconcept of transparency of accounting information and efficiency of resource allocation,and elaborated the related theory which transparency of accounting information affectson the efficiency of resource allocation. Then, choosing listed companies on Shanghaiand Shenzhen main board from2010to2013as samples, the writer built the regressionmodel on the basis of results of Wurgler’s researches, and empirically tested theimpact of transparency of accounting information on the efficiency of resourceallocation, with the help of Jones Model to measure transparency of accountinginformation. The results show that, for all the samples in the capital markets, the transparency ofaccounting information and efficiency of resource allocation is positively correlated,which is consistent with the theoretical analysis results. In another way to say, industrieswith high transparency of accounting information have higher efficiency of resourceallocation. However, from the industry aspect to analyze, only seven industries showeda positive correlation, while other industries are negative correlation. From the point ofspecific industries, the transparency of accounting information can not play a guidingrole for every industry. In view of these findings, this paper argues that negativecorrelation showed in some sectors is caused by the low provision of accountinginformation or the lack of effective attention on accounting information for investors. Inresponse to these conclusions, the paper put forward several recommendations fromthree levels, such as the laws and regulations construction, the enterprise internalmanagement and investor level, so as to guide the correct cash flow.