The Association Between New Equity Issues of Listed Firms and Earnings Manipulation in Taiwan: An Empirical Investigation

• Main Authors: Ko, Jin-Wei, 柯君衛
• Other Authors: Choi Kok-Kun
• Format: Others
• Language: zh-TW
• Published: 1997
• Online Access: http://ndltd.ncl.edu.tw/handle/38756230322966154701

碩士 === 淡江大學 === 會計學系 === 85 === The purpose of this research is to identify any empirical evidence of the association between new equity issues of listed firms and earnings manipulation in Taiwan. Those firms that plan to raise fund for their investment plans or improvement of their financial position must comply with the stipulation of the corporate law. Since profitability is a primary determinant of the evaluation decision of the underwriters and investors, the management of the firms contemplating to issue new equity stocks have strong motives to manipulate their earnings level, if they want to pass through the review process of the Security Exchange Commission of Taiwan and raise their needed fund successfully. At the same time, this manipulative attempt will also increase their personal wealth. Since empirical research for detecting managerial manipulation of earnings has been concertrated on uncovering evidence of manipulating accruals since the effort of Healy (1985), this study will follow the same track by examining empirical evidence of accrual manipulation a year before the new equity issues. We believe that the effect of manipulating accrual a year before their intended issuing date is the strongest and most effective to accomplishing their goal. Our result strongly supports our hypothesis that managerial manipulation of earnings through accrual exists a year before new equity issues in Taiwan. The management of these listed firms increase their discretionary accruals to enhance their earnings levels. After deleting firms that have new equity issues that are two years or more apart, the ststistical result is even more significant. We also observe that discretionary accruals decrease immediately after new equity issues. We infer that such decrease is due to the "write-off" of the discretionary accruals that were created before the new equity issue.