1st Research Brief of 2015

Source: Updated:2015/01/12/

★ Academic Actives

On Oct 14 2014, Albert Tsang, a associate professor from The University of Hong Kong, gave us a academic report “Disaggregated Management Forecasts and the Legal Environment:International Evidence”.
On Oct 21 2014, Anni Wu, a visiting professor from Taiwan Political University, gave us a report “The Field Empirical Study of Managerial Accounting:My Experience” 
On Nov 14 2014, Shasha Liu, a PHD from Peking University, gave us a report “Minority Shareholder Participation and Earnings Management:A Test of Catering Theory”。
On Nov 14 2014, Rui Sheng, a assistant professor from Nanyang Technological University, gave
us a academic report  “To Be Special,To Be Responsible:How Product Specificity Affects Corporate Social Responsibility”.
On Nov 14 2014, Jian Zhang, a associate professor from  Southwestern University of Finance and Economics, gave us a report “Employee Treatment and Earnings Management”.
On Nov 14 2014, Dongming Kong, a professor from Huazhong University of Science and Technology, gave us a academic report “Do Returnee Managers Bring Overseas Customers?”
On Dec 26 2014, Xiong Xiong, a professor form Tianjin University, gave us a academic report “The Calculation Experimental Financial Methods of the Analysis of Financial Derivative Trading Mechanism”.
Co-sponsored by the Accounting Department of Management School of Xiamen University, Accounting Development Research Center of Xiamen University and the Chartered Institute of Management Accountants (CIMA), the seminar "Dream of Management Accounting, fulfilled in China" and management control innovation research and "Global Management Accounting Principles "conference was held in Xiamen University on November 27, 2014. Many experts and scholars of different universities from China and abroad attended the conference.
Opening session of the conference was hosted by Professor Yuanlue Fu, the deputy director of the Development Research Center of Xiamen University, and Professor Feng Liu, vice president of Management School of Xiamen University made the welcoming remarks, followed by Miss Meihang Zhao, CIMA Chief Representative of mainland in China and core marketing director to introduce" Global Management Accounting Principles ". And she felt so honored that" Global Management Accounting Principles (Chinese Version) "can be released in Xiamen University and also hoped the principles could be popularized and applied in China.
The main agenda of this conference included three parts: keynote speeches, plenary lecture and guests’forum.
In the keynote report, Professor Wim A Van der Stede from the London School of Economics and Professor Yuanlue Fu from Xiamen University, delivered speeches respectively with themes of "The challenges of the new role of global management accounting-creating sustainable value” and "The new power of development of China Enterprise: Management Accounting innovation ” and answered questions of the experts.
In the part of plenary lecture, Dr. Jingwei Hua, president of Huaxia Jingwei, Associate Professor Shengqun Chen from Shanghai National Accounting Institute and Professor Liu Yunguo from Management School, Zhongshan University made wonderful reports to the Assembly. This seminar also invited Professor Jinye Xu from Shanghai University and Professor Xiaomei Guo from Xiamen University and other well-known experts and scholars as the observers of the plenary. The scholars and experts highly participated in this part and the venue atmosphere was very active.
Finally, in the last process of guests’ forum, this seminar invited Professor Chuxiong Xiong from Shenzhen University, Professor Shaohua Chen form Xiamen University, Dr. Zongliu Liu, vice president of Xiamen Accounting Society, Dr. Huaxia You, president of Huaxia Jingwei and Professor Jinye Xu from Shanghai University made a lively discussion on “Management Accounting Research Personnel Training Issues from Corporate Control Talent Demand". Every scholar put forward their own views based on their experience and understanding of the training of management accounting professionals and these insights were very important references for the setting and reform of curriculum of management accounting in Xiamen University.
The convening of this conference will act as a positive role for exchange and cooperation between scholars of global management accounting and promotion of innovation of management accounting in the field of academic research. The conference also will have a positive impact on construction and development of management accounting system with Chinese characteristics.

In order to better promote the development of China's accounting and financial management research, and provide a platform for academic exchange about cutting-edge research of China's accounting and financial management, Contemporary Accounting Review symposium co-sponsored by Center for Accounting Studies of Xiamen University, the key research base of Humanities, Social Sciences accounting department of Management School of Xiamen University with national key subjects and Institute for Financial &Accounting Studies, the national "985Project" philosophy and social sciences innovation platform of Xiamen University was held on 6 December 2014 at Science and Art Center in Xiamen University. Many scholars majored in accounting coming from domestic colleges and universities have attended this conference.
Both associate Dean of the management school of Xiamen University and the expertise member of Center for Peaceful Development, Cooperation and Innovation Cross-Strait Relationships, Professor Feng Liu, and chief editor of Contemporary Accounting Review, director of the Center for Accounting Studies of Xiamen University and Dean of Institute for Financial &Accounting Studies, Professor Xiaohui Qu, attended the opening ceremony and delivered a speech. Professor Qu, chief editor of Contemporary Accounting Review, said, " Since the founding of Contemporary Accounting Review in 2008, it has adhered to the academics, contended for attention of all schools of thoughts, adopted the management specification and double anonymous peer review system of international academic journal, and attained a high academic reputation after years of being persistent and enterprising and on December 20,2013 was indexed by CSSCI (2014-2015).  Contemporary Accounting Review academic seminar not only collected papers for Contemporary Accounting Review itself, but also provided a platform for academic exchange for the cutting-edge accounting and finance research, cultivating original results on high level and supporting academic fresh. In order to create this journal a academic forum of good quality, we sincerely invite scholars at home and abroad to contribute papers, continuing to support the development of this publication, and finally to make it one of the leading journals in the field of accounting and finance in China. What is more, Professor Yuanlue Fu, deputy director of Center for Accounting Studies of Xiamen University, presided over the opening ceremony.
The meeting received a total of 32 candidates, after a review of the experts and the author agreed to contribute to the publication, a total of 9 papers were selected for the general assembly.
In the first phase of the paper reporting, "profit fluctuation, profit persistence and the post-earning-announcement drift", a paper of Zhizhong Huang, an associate professor from Business School of Nanjing University, found that the increase of profit volatility does reduce the profit persistence, but when the extent of profit volatility is at the two extremes, the accuracy of profit predictability will be at the low; especially after the implementation of fair value accounting standards, the fluctuation of profits reduced more, which lead to more serious post-earning-announcement drift. Dr. Lijuan Mao, from School of Management of Shanghai University, reported her dissertation— “the audit quality, financial restatement and the change of audit institutions”. With the research sample of listed corporation from 2008 to 2012 in Shanghai and Shenzhen Stock Exchange, her study found that high quality of independent audit reduces the probability of financial restatement and severe financial restatement, and also those listed corporations that have occurred financial restatement are more likely to change their audit institutions. If there have been a serious financial restatement, the probability of the change of audit institutions is quite greater. When the financial restatement and sever financial restatement occurs, the companies audited by high quality accounting firms are more likely to change their audit institutions than those audited by low quality accounting firms.
In the second phase of the paper reporting, Jinbo Luo, from Accounting School of Jiangxi University of Finance and Economics, whose dissertation—“fund's holdings, social trust environment and audit opinion”, found that the companies which have fund's holdings will increase the probability of gaining the unqualified opinion and the impacts are more obvious both in the fund's high holding company and state-owned enterprises; social trust environment has weakened the positive effects of “clear” audit opinion towards companies with the fund holdings, and the effect is more significant in private enterprise sand enterprises with low fund holdings. Vice Professor, Shuiping Shi, from Management School of Ji’nan University, report his essay—"the financing decision and audit demand of family firms under opportunity inequality-- the empirical evidence from the family listed corporation”, and found that the opportunity inequality plays a key role in external audit demand of family firms in some regions. In the areas with high degree of financial development, family firms need higher earnings quality to get loans, and accounting information disclosure is also more transparent.; the longer debt maturity of the family enterprise, the higher demand to external audit quality; earnings ability and political relevance also affect the family business audit needs.
In the third phase of the paper reporting, Kejing Chen, from the Dalian University of Technology Faculty of Management and Economics, whose dissertation —"the empirical research of the impact factors on work capital and its adjustment speed of the listed Corporation”, found that the company characteristics, corporate governance and macro-environment are quite important factors in the choice of working capital management strategy for listing Corporation. There are significant regional differences in the adjustment speed of the working capital of the listing corporation in China. The results of working capital adjustment of partial listed corporation deviate from the optimal scale of working capital, and the allocation efficiency of working capital is low in our country.
Heng Ma, associate professor from College of Economics and Management, Nanjing University of Aeronautics and Astronautics, report his essay—“research on financing efficiency based on DEA in Chinese new material industry”, found that from 2011 to 2013, the financing efficiency of Chinese new materials industry changed significantly with a continuous decreasing trend; analyzed some problems existing in the financing efficiency of new material industry, and table some proposals to solve these problems.
In the fourth phase of the paper reporting, associate professor Zhonghai Yang, from School of Accountancy of Harbin University of Commerce report the paper " research on the relationship between the comparability of financial reporting and equity capital cost" , which indicates that the comparability of financial report showed downtrend after the implementation of the new accounting standards in 2007; because the investors do not pay enough attention to the accounting information in the process of investment, the comparability of financial report do not have a significant impact on the cost of equity capital. The financial report can be found to be lower than that in 2007. Honghui Zhang, from School of Accountancy of Jiangxi University of Finance and Economics, delivered his dissertation "The loss companies’ negative earnings management: stopping losses or aiming to gain financial subsidies?", and found that the listed corporations at loss are more preferred to perform a kind of negative earnings management behavior; negative earnings management behavior of the listed loss marking corporations have an obvious motivation both aiming to turn losses into gains and gain some financial subsidies, but compared with the motivation of financial, the former is more strong; listed loss-making corporations getting financial subsidies are also helpful for it to achieve gains. Naqiong Dong, coming from the Peking University HSBC Business School, report her dissertation " The character of local independent directors with financial background, executive compensation and turnover ", and found that hiring the local independent directors with financial background increases executive compensation both in cash and option, but also reduces the performance sensitivity of executive cash and compensation in option; hiring the local independent directors with financial background did not affect the executive  turnover, but weakened the performance sensitivity of these executives’ turnover.
For every selected paper, this seminar invited well-known experts to conduct in-depth reviews, and proposed some amendments, which will be helpful for both the author and the scholars. After the seminar the authors will be based on the experts’ proposals to modify their paper and respond to all of experts’ comments, and we will also arrange experts to further review, in order to improve the quality of the paper.
The academic seminar of Contemporary Accounting Review will be held regularly as the platform for the construction, development and improvement of the journal. We eagerly look forward to continuing to receive the strongly support and enthusiastic participation from scholars at home and abroad.

★ The Progresses of Major Programs 

Major program No. 1: Research on guidance mechanism of financial analysts’ information and its supervision
Responsible person: Zuyun Xue
The program is finished and we are arranging relative materials to write conclusion report.

Major program No. 2: Research on Chinese listed firms’ internal control evaluation and its index 
Responsible person: Hanwen Chen
The research achievement in the stage: Yibing Wu. 2015. Internal Control and Independent Director Regulatory. Working paper.
Abstract: The supervision function of independent directors has been the issue of domestic and foreign researchers. Based on the sample of 2007--2012 Chinese A-share listed companies, we investigate the relationship between the quality of internal control of listed companies and independent directors supervise efficiency. The result shows that the more professional the independent directors are, the more efficient the supervision are, while the firms with higher level of internal control quality always have more professional independent directors. Besides that, we find the efficiency of supervision is positive with the internal control environment, control activities and internal oversight through the division of internal control, which indicates that the mechanism of the effect of internal control on the efficiency of independent directors is to meet the needs of environmental management, financial risk and information risk.

Major program No. 3: Economic cycle of industry, investment and financing behavior of R&D and firm value.
Responsible person: Hong Xiao
The concluding report has been submitted

Major program No. 4: Research on the internal accounting statement of risk management and control in corporation.
Responsible person: Shaohua Chen
The group is consolidating relative material to make the outline and framework of final study report in this season, and finally to make final research report around the theme of "internal accounting reporting of Enterprise Group Risk Management and Control".

The research achievement in the stage: Zhao, W., and R. Hou. 2014. Consideration of investor protection substitute mechanism of accounting standards. Communication of Finance and Accounting (in Chinese) 33: 3-6.
Abstract: Investor protection mechanisms include "standard mechanisms" and " substitute mechanisms." In transition economies, the standard mechanisms, such as marketing, legal, government regulation ,for the protection of investors are often not perfect, so the investors demand for alternative mechanisms to get protection. GAAP has been able to become an alternative mechanism, because the accounting information regulated by the accounting standards have pricing and management functions to the securities market to ease the issues of adverse selection and moral hazard, thereby protect investors. The relative independence of accounting standards in the theory and practice also to ensure the rationality of its position as the alternative mechanisms.

Major program No. 5: Research on the Non-market control transfer
Responsible person: Feng Liu
The group is consolidating relative material to make the outline and framework of final study report in this season, and finally to make final research report around the theme of "Research on the Non-market control transfer".

The research achievement 1 in the stage: Liu, F., and X. Feng. 2014. A Study of Motivations for Listed Firms' to Terminate Stock Option Incentive Plans. Journal of Xiamen University 5: 126-35.
Abstract: Since 2006 China Securities regulatory Commission ( CSRC) began to allow firms to grant stock options as compensation to top management and employees. By the end of 2012,377 listed firms had announced their stock option incentive plans,yet 104 of them terminated those incentive plans afterwards. So far no research has been done on what led to their terminations in China. We examine the reasons at a deeper level starting from analyzing the initial explanations when the plans were first announced,validating empirically the rationality of their terminations,together with an analysis of specific characteristics of the Chinese capital market. The results suggest that firms terminate their plans mainly because of poor performance of their stocks in the capital market,and also because of distributional differences in incentives for executive members and key employees.

The research achievement 2 in the stage: Chen, H., and F. Liu. 2014. The Governance Roles of Margin Trading: A perspective of Earnings Management.
Abstract: Based on the pilot margin trading in China,this paper examines how margin trading affects earnings management of listed companies.Using a difference-in-differences approach,we find that compared with the control firms,the companies that are eligible for margin trading significantly reduce their earnings management after being designated as the underlying securities.The effect is concentrated in regions with higher degree of marketization.For companies without balanced ownership structure,only in regions with higher degree of marketization can margin trading discipline earnings management. These results indicate that margin trading plays a role in corporate governance,and its effects depend on the improvement in external market environment.

The research achievement 3 in the stage: The Transfer of Control in Advance: Causes and Consequences (Working paper)

The research achievement 4 in the stage: Mystery of the Board of Directors (Working paper)

The research achievement 5 in the stage: Research on the Non-market control transfer (Working paper)

Major program No. 6: Research on the management accounting report system design of group control.
Responsible person: Yuanlue Fu

The research achievement in the stage: Fu, Y. 2014. The Development of Management Accounting Theory: The Design and Optimization of Management Control Mechanism. Contemporary Accounting Review 2.
Abstract: Over the past 20 years, the significant development of management accounting (MA) Theory in cost management and performance measurement, especially in ABC and Balance Score Card, has made a significant impact on business management. However, there is little research on the application of the mechanism design theory to MA system design. To promote the development of management accounting theory and help to achieve a balanced corporate goal,
This paper discusses show to apply the mechanism design theory to the optimization of designing an internal report system and incentive plans and to the establishment of a new frame work of MA system that can be used in the practice of MA. The significant innovation of our new model is to apply the above two theories to eight procedures:①strategic planning;②refining a corporate goal into its sub-objectives;③determining responsibility and allocating resources;④optimizing the internal reporting system and incentive plans;⑤implementing the strategy;⑥managing all business processes;⑦measuring performance of staffs who take responsibility;⑧collaborating with management in managing inter-business units. Hence, our research extends the MA theory, supports managers, strategic decision making, and optimizes the mechanism and design of MC.

Major program No. 7: Research on the pricing role of accounting information——based on the view of international convergence of accounting standards.
Responsible person: Xiaohui Qu

The research outcome 1 in stage: Chen, M., and X. Qu. 2014. A Systematic Test of the Effects of International Convergence of Accounting Standards on Accounting Information Quality . Contemporary Accounting Research 1: 1-27.
Abstract: International convergence of accounting standards is a systematic project. However, the existing literature of testing the effects of accounting convergence on accounting information quality is unsystematic, resulting in a lopsided view of accounting convergence. Combining normative and empirical research methodology, this paper develops an analytical system for the characteristics of accounting information quality, and then empirically examines the effects of international convergence on accounting information quality. This paper finds that international convergence significantly improves the value relevance of accounting information based on fundamental qualitative characteristics, whereas accounting standards that are principle- orientated and emphasizes fair value reduce earnings smoothness, improves neutrality, and simultaneously induces more discretionary accrual sand lack of conservatism because the management has more discretion and makes more judgment. In addition, we find that international convergence increases the horizontal industrial comparability and vertical earnings consistency, evidence for improvement of qualitative characteristics. We conclude that accounting standards convergence overall enhances the accounting information quality.

The research outcome 2 in stage: Control Right, Investor Sentiment, and the Value Relevance of the Change of Fair Value (Forthcoming)
Abstract: The Paper investigates the value relevance of the change of fair value of available for sale financial asset, and the effect of investor sentiment and control right on the relevance. We find that the change of fair value of available for sale financial asset have significantly positive value relevance, and investor sentiment have a positive effect on the relevance. Further, the result shows that the share percent of controlling shareholder have a negative effect on the relevance.

Major program No. 8: Political Connections and the Credibility & Relevance of Accounting Information——Data Mining and Positive Research
Responsible person: Xingqiang Du

The research outcome in stage: Du, X. 2014. Does Confucianism Reduce Board Gender Diversity? Firm-level Evidence from China. Journal of Business Ethics 12
Abstract: This study extends previous literature on the association between Confucianism and corporate decisions by examining Confucianism’s influence on board gender diversity. Using a sample of Chinese listed firms during the period of 2001-2011 and geographic-proximity-based Confucianism variables, I provide strong and consistent evidence to show that Confucianism is significantly negatively associated with board gender diversity, suggesting that the proportion of women directors in the boardroom is significantly lower for firms surrounded by strong Confucianism atmosphere than for firms located in regions with weak Confucianism atmosphere. This finding also implies that Confucian philosophical system has important impacts on business ethics and women’s status in corporate governance. Moreover, GDP per capita, the proxy for economic development level in a province in which a firm is located, attenuates the negative association between Confucianism and board gender diversity. Above results are robust to different measures of Confucianism and board gender diversity and are still valid after controlling for the potential endogeneity between Confucianism and board gender diversity.

Major program No. 9: Principle-Based Accounting Standards, the Professional Judgment of Accounting and the Quality of Accounting Information: Theory and Positive research
Responsible person: Shijun Sang

The research outcome 1 in stage: Research on the Reciprocal Relation Between Principles-Based Accounting Standards Relationship and Accounting Professional Judgment –Evidence from SAIC and GM Joint Venture Arrangements (Working paper)

The research outcome 2 in stage: Research on the Application of Accounting Professional Judgment in Financial Instruments—Based on Research of Preferred Stock and Debt Classification.
The research outcome 3 in stage: Research on the Application of Accounting Professional Judgment in Debt Contract, we have collected relative data and prepare to write the paper.

Major program No. 10: Research on the Problem of Financial Governance in Public Sector
Responsible person: Jianfa Li

The research outcome 1 in stage: Li, J. 2014. Exploration : Comprehensively Deepening Reform-based Approach to Government. Accounting Research 11

The research outcome 2 in stage: Research on the Issue of Government Comprehensive Financial Report from the Perspective of National Government.
Abstract: Public environmental shapes the reporting reform path of government financial. Now the construction of modern state governance system with Chinese characteristics is the most significant public environment. To match the construction, we explore open and transparent system of government related issues consolidated financial reporting in line with international practice accrual based on the new public governance theory, the theory of governmental accounting and financial reporting, etc. by using the good national governance as a benchmark  First, the state of good governance principles of the new Public Governance Theory includes transparency, accountability, participation, and effective, honest, legitimate, public response, stable, honest, fair and other public value. Secondary, Using the principles to guide the construction of an accrual-based government financial report. Thirdly, the paper builds good governance oriented country government accrual-basis consolidated financial statements from the perspectives of government financial reporting objectives and reporting model, the government accounting and financial reporting standards system, accrual-based government accounting system, system of government consolidated financial statements under such system, building. Finally, we analyze the barriers and difficulties in the construction of the financial report, and put forward policy recommendations. This paper contributes to building a modern national system with Chinese characteristics governance, and provide policy implications for the change of financial reporting system.

Major program No. 11: Research on the design and the effect investigation of international convergence of fair value measurement model
Responsible person: Guohua Zhang

The research outcome in stage:

The project has been formally approved by the Ministry of Education for the 2013 annual education of Humanities and social science research base of major projects, project granted number: 14JJD790008.
Since the project, "International Convergence of fair value measurement model design and effect test" has been granted, it is progressing well. According to research plan, group members are combing relative theory of fair value measurement, to carry out a comprehensive literature tracking and status of research work. Now we have a great deal of home and abroad literature related to fair value measurement, the fair value method of valuation, the fair value valuation model, the fair value of financial assets and financial liabilities valuation and economic consequences, the fair value of investment property valuations and its economic consequences , and we are emerging research review of them.
In addition, the research group has completed the status of investment property at fair value valuation of the research, and the formation of a research report. Binding guidelines for investment property and fair value measurement criteria, the research group would reveal three levels of the fair value measurement of investment property is not fully applicable to the measurement of fair value from the perspective of theory and practice. The study found the main source is the second level of the input value of investment property at fair value valuation, which is less at the first level, and third-level input values do not apply; companies rely more on agencies for investment property at fair value estimate value; market approach is the main method of valuation of the fair value of investment property, while the income approach exists in a few applications; application of the fair value in investment real estate has obvious industry characteristics, and positively correlated with the extent of the real estate market development. 
Studies suggest that the main reason for less use of the fair value measurement of investment real estate is the market environment limitation and excessive reliance on intermediaries assessment. Since serious lacking of information disclosure of the investment property in fair value valuation in majority of enterprises, as well as the vast majority of the fair value is the second level of the input value,it will inevitably lead to lack of verifiability of the fair value of business investment property and decreasing of reliability of financial information. The study is currently being further refined, and we expect to form a paper and make it published this year in the journal belongs to CSSCI.