Earnings Management and the Value-relevance of Financial Statement

• Main Authors: Liao Ying Jen, 廖英任
• Other Authors: Fan Hung Shu
• Format: Others
• Language: zh-TW
• Online Access: http://ndltd.ncl.edu.tw/handle/77307771028648677585

碩士 === 輔仁大學 === 會計學系碩士班 === 93 === This study examines the impact of earnings management on the value-relevance of financial statement information. Earnings represent a firm’s performance during an operating cycle and the book value of equity represents a firm’s entire value at a specific date. Earnings and book value of equity are two key factors that investors use in their equity valuation decisions. For this reason, this study focuses on these two accounting basic figures to examine the value-relevance of financial statement information. We use industry-based cross-sectional Jones model to estimate total discretionary accruals. Then, according to its short and long factor to divide total discretionary accruals into short-term discretionary accruals and long-term discretionary accruals to examine the impact of earnings management on the value-relevance of financial statement information. Our main findings are summarized as follows: First, the value-relevance of earnings is decreased and the value-relevance of book value of equity is increased when firms manipulate earnings via total discretionary accruals and long-term discretionary accruals. Second, the value-relevance of earnings is decreased but the value-relevance of book value of equity has no influence when firms manipulate earnings via short-term discretionary accruals. Third, earnings management via long-term discretionary accruals has a greater impact on the value-relevance of equity-book-value than earnings management via short-term discretionary accruals. Fourth, when firms report positive (income-increasing) discretionary accruals, the value-relevance of earnings and equity-book-value has no influence except the value-relevance of equity-book-value is decreased when firms manipulate earnings via short-term discretionary accruals. In addition, when firms report negative (income-decreasing) discretionary accruals, the value-relevance of earnings is decreased and the value-relevance of equity-book-value is increased when firms manage earnings via all kinds of discretionary accruals. Fifth, when firms manage earnings, the valuation ability of accounting information will decreased and we conclude that the mangers tend to manipulate earnings opportunistically.