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Financial Accounting Information and Corporate Governance

Author: LiZuo From: www.yourpaper.net Posted: 2010-01-06 05:31:28 Read:
[Abstract] financial accounting for the company control mechanisms to provide direct and indirect financial information reflects the results of the game between the stakeholders, and corporate governance environment to ensure true and reliable financial and accounting information. Is a two-way interactive relationship between the financial and accounting information and corporate governance structure.
[Keywords] Financial Accounting Information Corporate Governance interactive relationship

Financial accounting for the company control mechanisms to provide direct and indirect financial information reflects the results of the game between the stakeholders, and corporate governance environment to ensure true and reliable financial and accounting information. Is a two-way interactive relationship between the financial and accounting information and corporate governance structure.

A financial and accounting information and corporate governance structure

Accounting information is based on accounting standards and accounting system to the majority of the stakeholders to provide information about the operations of the company is one of the stakeholders an important basis for decision-making. The authenticity of accounting information directly related to the decisions of the stakeholders and their results. Distortion of accounting information is the accounting information is not a true reflection of the objective economic activity to the relevant decision-making of investors that adversely affects a phenomenon. Distortion of accounting information may lead to policy mistakes, and part of the socio-economic resources of stakeholders invalid configuration will cause turmoil in the securities and capital markets, one of the factors affecting the normal economic order.
The corporate governance structure internally between the different stakeholders interests and behavior in the modern corporate system used to coordinate a series of laws, culture, habits and institutions collectively. Corporate governance structure is the other interests of the investors in the management of the company, employees and creditors in corporate and property of the principal - agent relationship between the rights, responsibilities and interests to regulate and coordinate the relationship between the effective functioning of this arrangement must rely on the company's financial Information outside of the corporate governance mechanism capable of producing a fully competitive constraint manager behavior can solve the problem of the separation of ownership and control monitoring. In a country or market, the company's external governance mechanism is basically the same, then the difference of the company lies in the internal governance mechanisms.

Financial Accounting Information and Corporate Governance interactive relationship

1 The role of financial accounting information in corporate governance mechanisms
Whether the company's financial structure is reasonable, has a direct impact on the level of efficiency of the corporate governance structure and constraints. Game results in the interests of the company in the corporate governance structure is directly reflected in the company's accounting information. Full accounting information systems play an important role to reduce information asymmetry control adverse selection and moral hazard limit. Effective information disclosure and auditing system, on the one hand by means of accounting information to support the orderly operation of the external competitive market system, constitute a credible threat to take over the external governance mechanisms managers deviate from the shareholders' interests behavior; the other hand, accounting information plays directly in the internal governance structure, governance to communicate the value of monitoring, evaluation and contract. Financial accounting system is the logical starting point to clarify the issue of moral hazard Important information system of property rights adjustment, contribute to the distinction of the board can control events and uncontrollable events, managers often budget and make periodic reports to explain the deviation from the budget submitted to the Board, which may help the Board the distinction can control events and uncontrollable events.
If no reliable accounting information to support any decision of the board of directors, board of supervisors and other internal control mechanisms may be blind invalid. Financial incentives, particularly stock options is the most important part of modern corporate governance, share residual income by allowing executives to motivate executives to create superior results. The highly integrated accounting information to become the basis for the design and implementation of incentive contract. Internal managers talent market is reflected in the results of the evaluation manager of financial and accounting information, the appointment and removal of market-oriented mechanism to promote the managers, the legal system, and solve the problem of the source of the Executive Governance.
In short, we can locate the role of accounting information in corporate governance: external reporting of financial accounting data used in the control mechanisms to ease shareholder - manager of agency problems, with a view to improving the efficiency, thereby enhancing the the economic performance of enterprises. Internal and external governance mechanisms affect the financial and accounting information
Comprehensive understanding of financial and accounting information in economic resource allocation must study corporate governance, corporate governance research in order to make the desired results, the key depends on the degree of master of both sides information. Financial accounting information is objective, fair and reflect the balance property rights game between the internal and external governance mechanisms in corporate governance and all stakeholders.
Separation of ownership and "asymmetric information between the presence of the manager and property rights" absent "is an objective reality, there are two levels, the first level is about the business environment, future prospects and other status information; second level information about manager effort. Managers grasp the advantage of the first-level information, which is a favorable condition to fit them in decision-making and management. Due to the different goals of the main interests of enterprise property rights, in order to prevent the prior adverse selection caused by asymmetric information and ex post moral hazard behavior away from the enterprise stakeholders need analysis, verification of the information provided by the managers. Through negotiations with the owners of human capital in order to improve efficiency, shareholders and other external property rights, this analysis, the validation process is institutionalized. Such as internal corporate governance structure, the Board of Directors in the establishment of an audit committee or the introduction of independent directors with professional quality; outside of the corporate governance structure may be relying on intermediaries, in order to ensure the reliability and relevance of accounting information managers. Visible, the financial and accounting information and corporate internal and external governance is a two-way effect.

Third, our financial and accounting information governance role and Countermeasures

In China, the supervision of the accounting staff party government and other external oversight bodies; inspired party shareholders and management; distortion of accounting information of listed companies in China's beneficiary is the largest shareholder and the company's management and internal. We can identify the existing problems of China's listed companies: (1) incomplete control of the Company, the absence of large state-owned shareholders, small shareholders unable to control the result listed companies in China's internal control. Listed companies to obtain due to the state-owned shareholders of external control over more insider control lost constraints. (2) The dislocation of control and risk takers. Control over listed companies in China are mainly in the hands of large shareholders and insiders, but the risk is mainly borne by the minority shareholders, creditors and employees, is not directly proportional to the risks and benefits.
Governance structure is the reason for the distortion caused by the accounting information of listed companies in China to reduce the distortion of accounting information can only improve and perfect the governance structure of listed companies in China to start: (1) determine the goal of the governance structure of listed companies in China, the interests of the corporate body maximized. (2) improve and perfect the equity structure of listed companies in China, to foster full shareholder. (3) improve and perfect control over the problem of China's listed companies to establish full control over. (4) a sound and effective oversight mechanisms to improve the oversight mechanisms of China's listed companies.
Of the equity division reform forward, the state-owned shares in circulation, "dominance" phenomenon in a way will be improved. Gradually perfected through the introduction of institutional investors and social capital, the independent director system, the improvement of the management compensation contract, market cultivation of internal managers, given our corporate governance theory will gradually improve, and thus make the country's financial and accounting information to improve the quality of . Improving the quality of financial accounting information, in turn, will improve the efficiency of corporate governance, thus contributing to the improvement and development of China's modern enterprise system. Concerned about the environmental effects of the external governance mechanisms in the study on the basis of the internal governance mechanisms, cultivate a system of governance of China's external factors. The only way to make our corporate governance has been improved and will provide relevant and reliable financial and accounting information to investors, thereby protecting the interests of investors.
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