An Experimental Research on Accounting Fraud Based on Regret Theory
|School||Dongbei University of Finance|
|Keywords||Accounting fraud Anticipated regret emotions Experienced regretemotions Regret aversion Experimental study|
When Enron, WorldCom and other cases of fraud that shocked the world have become the past, in recent years, accounting fraud and fraud case is still present after another and even worse. There are some famous international financial fraud cases recently, the first one is the manufacturer of digital camera, Olympus.As the largest financial scandal of Japan’s history, the financial fraud of Olympus has threatened the survival of this enterprise which is92-year-old. In addition, as the acquisition of software company Autonomy is associated with "significant improper accounting treatment", Hewlett-Packard Company’s stock price in regular trading on the NYSE fell up to11.95%on that day. From Hunan Shengjingshanhe Bio-Technology which has been delisted due to inflated business to Zixin pharmaceutical company which forged the customer list, to Yunnan GREEN-LAND BIOLOGICAL TECHNOLOGY which exposed its terrible scam, to the recently famous case of Wanfushengke, and in the meantime, there are many other Chinese stocks in the U.S. market which are often exposed fraud scandal. Some Listed company through means of fraud means to meet the individual interests, but it is at the expense of group interests, if this bad behavior could not be punished, the market will lose the fundamental fairness. Therefore, the strengthening of in-depth study of the accounting fraud has become the highly concerned issue of government departments, enterprises and the majority shareholder and the whole community highly.The past researches of accounting fraud, either from the perspective of external factor or fraud behavior, do not consider emotion factor especially regret emotion. However, there are more and more research of regret emotion in economics, psychology and interdisciplinary which show that as one of the common emotion daily, regret has significant impact on major decision making. And as one significant risk decision behavior, whether fraud is also bound by the emotional impact of regret emotion? This paper tries to take the regret emotions of behavioral agent as a factor into consideration when it analyzes fraud. Based on the spirit of "regret aversion", this paper adds the psychological factors when analyzing the fraud decision to make the decision-making model more realistic, and the research of regret on economics has mathematical derivation, which is essentially a calibration of the traditional theory of expected utility model to make up the defect of explanation of accounting fraud in general behavior scientific, so that analysis about accounting fraud combined with psychological factors is more feasible. This paper explores the psychological characteristics and decision-making rules from the inner of behavior agent, then explains the formation mechanism of accounting fraud more convincingly, and finally recommends the suggestions of fraud by analyzing the factors of regret emotional and experienced regret in the fraud case, which has a actively significance to build and improve the prevent and control system of fraud.In the first part of the paper, I introduce the research background, significance, research ideas, method and the main contribution. The second part has the literature review of relevant research carried out at home and abroad.This paper defines the concept of accounting fraud, the concept of regret emotion and counterfactual thinking in the third part, and describes the theory of regret and standard theory based on this article, so as to pave the way of the theoretical analysis later.The forth part of the article makes the theoretical analysis on the influence of fraud behavior decision from the expected regret emotion and experienced regret emotion, and explains how the regret emotion to affect the decision-making before and after the feason makes the fraud decision, and then this paper comes up with eight assumptions. The fifth part of this article introduces the experimental purpose, experimental subject, experimental background and task detailedly, and then there is the analysis of the experiment and the following conclusion in the sixth part, feedback information could change his fraud prefer by bringing out the feason’s expected regret emotion outstandingly; expected regret emotion could change feason’s prefer distinctly, and the up expected regret emotion could strengthen feason’s fraud prefer compared than the down expected regret emotion; in the fraud case, personal responsibility becomes weaken along with the increasing of people, and much more responsibility and more regret; experienced regret emotion could change the feason’s refraud preference outstandingly.This paper puts forward the countermeasure to prevent and control the financial report fraud behavior of management layer in the listed companies and the limitations of this study in the VII section.