The Drivers of Non-operating Income

• Main Authors: Ya-Chi Hsu, 許雅琪
• Other Authors: Wen-Jing Chang
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/20901323910577692359

碩士 === 國立彰化師範大學 === 會計學系 === 91 === While non-operating income have played an important role in some firm’s total earnings, investors often view non-operating income as “negative news.” The purpose of this study is to provide evidence on significance and possible drivers of non-operating income, and try to explore more comprehensive and objective view. On the other hand, to distinguish the difference between whole and individual of non-operating activities, we test both total and each item numbers. After summarizing the past research, we identify five drivers of non-operating activities: operating condition, management style, financing plan, earnings management and macroeconomics factors. We document and analyze a panel sample of 295 firms from 1996 to 2001, and the results of significant analysis are as follows: First, on average, non-operating income doesn’t play a significant part of total income, but the extremes imply a few firms operate dependent on it very much. “Interest income,” “investing income,” and “gain on disposal of investment” are most active items. Second, non-operating income is positively related to macroeconomics factors. Third, we find steel industries lose most and automobile industries gain most on non-operating activities. Fourth, if the performance of non-operating activitives is the worst, the performance of operating condition is also the worst. However, if firms perform the best in non-operating activities, their operating condition isn’t the best. On the other hand, the results of empirical test of five drivers are: 1.Non-operating performance is positively related to operating condition. Among all non-operating activities, investment performance is also positively related to operating condition. However, gain on disposal of investment is negatively related to operating income. 2.We don’t find the phenomenon that management style of valuing the firm size affects non-operating income. 3.With view of the overall non-operating activities, financing plan is not the significant driver, but the “asset sale” prove the hypothesis. This result implies that the management tends to sell assets when the free cash flow was too low. 4.The management will use non-operating income to smooth earnings, and “asset sale,” and “exchange activities” are proved efficient ways. However, we don’t find the evidence of “big bath.” On the other hand, the management may recognize investing income to lower the debt-to-equity ratio. 5.The performance of non-operating activities is positively related to the macroeconomics condition.