Accounting Issues in International Joint Ventures in the People's Republic of China

Tang, Qingliang (1992) Accounting Issues in International Joint Ventures in the People's Republic of China. PhD thesis, University of Glasgow.

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Abstract

Joint venture relationships have become an important strategy for multinational corporations for their global expansion into overseas markets. The purpose of this research is to investigate some new accounting problems relating to international joint ventures with special reference to China. The thesis covers such accounting issues as: the relationship between accounting differences and business decisions in the context of international joint ventures; the economic consequences of international harmonisation of accounting standards; foreign influences on accounting practices in joint ventures; and the interaction between culture and accounting practices. INTERNATIONAL ACCOUNTING DIVERSITY AND BUSINESS DECISIONS This aspect of the study explored whether the diversity among national accounting and disclosure practices and regulations affects the business decisions of major foreign users of financial statements. The study focused on Chinese joint venture financial statements and the use of them by UK multinational companies in relation to the business decisions about a joint venture. The research methodology used here was on a case study basis for the UK MNCs which have joint ventures in China. The findings are consistent with the notion that accounting differences may affect the business decisions of parent companies in relation to a joint venture. ECONOMIC CONSEQUENCES OF INTERNATIONAL HARMONISATION OF ACCOUNTING STANDARDS The issue of economic consequences of the international harmonisation of accounting standards is also investigated. In this regard, a theoretical model is proposed which attempts to explain and predict the harmonisation of accounting standards across countries. The theory proposed emphasises the economic consequences of the suggested harmonisation of accounting standards on local affected groups. This model is then used to try to explain the process of harmonisation of accounting standards in the case of Chinese joint ventures. Finally a case study of the financial statements of a joint venture presents an observed cash flow effect of changes of accounting methods used for measurement and valuation. FOREIGN INFLUENCE ON ACCOUNTING MEASUREMENT PRACTICES A study of accounting choice in joint ventures is also carried out, investigating whether accounting measurement practices appear differently as between joint ventures with different foreign backgrounds. The focus is on the major foreign partners in Chinese joint ventures: US, Japan, Hong Kong and UK investors. Rather than testing individual accounting method choice separately, an attempt is made to conduct an overall assessment of accounting practices of Chinese joint ventures. For this purpose, a point-system is designed to measure the extent to which a joint venture uses income-decreasing or conservative accounting measurement methods for each joint venture taken from a random sample of companies. Then comparisons of the conservative measurement scale are made between different joint venture groups using univariate and multivariate analyses. The findings support the hypothesis that there are significant differences in accounting choices between joint ventures with different foreign backgrounds. CULTURE AND ACCOUNTING STANDARDS The interaction of cultural factors and accounting standards is also investigated. In particular, the study is concerned with how the accounting environment affects judgments about the appropriateness of accounting standards in terms of the truthfulness and fair ness of financial statements. The hypothesis is that people from different accounting subcultures may have different judgment as to whether a particular accounting standard can provide a true and fair view of financial position and results. The research tests the attitudes of British and Chinese people towards the Chinese joint venture accounting regulations as to whether the regulations can give a true and fair view of financial position and results. Contrasting views were found between the two groups of subjects from Britain and China. CONCLUDING OVERVIEW The study focused on accounting issues in a relatively new research field, that of international joint ventures. The findings increased our understanding about accounting practices used in Chinese-foreign joint ventures. The study also provided new insights into a number of accounting debates and unsolved problems. The research, subject to certain limitations, either presented evidence supporting already known hypotheses, e.g. accounting diversity and decision-making, interaction between culture and accounting; or raised some new accounting issues for further research consideration, e.g. economic consequences of the harmonisation of accounting standards. It is hoped that the achievements in this area facilitate the progress of international harmonisation of accounting and financial reporting practices.

Item Type: Thesis (PhD)
Qualification Level: Doctoral
Keywords: Accounting, Economic history
Date of Award: 1992
Depositing User: Enlighten Team
Unique ID: glathesis:1992-76373
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 19 Nov 2019 15:09
Last Modified: 19 Nov 2019 15:09
URI: http://theses.gla.ac.uk/id/eprint/76373

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