Effects of Taiwan’s SFAS No.34 on Nonprofessional Investors’ Judgments: An Example of Trading Securities

• Main Authors: Yi-Chia Feng, 馮怡嘉
• Other Authors: 顏信輝
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/64538651109316392141

碩士 === 淡江大學 === 會計學系碩士班 === 94 === According to Efficient Market Hypothesis, holding constant the available information and underlying economics, different presentations of financial information would not have an impact on investors’ judgments. However, many psychological researches result in adverse conclusions. Therefore, the objective of this research is to determine whether the presentations of financial information would have an impact on nonprofessional investors’ judgment, using Taiwan’s SFAC No.34 “Accounting for Financial Instruments.” First experiment uses a 2*2 between-subjects experiment to test on a pre-selected focus group, which consists of graduate accounting students, by giving them two different scenarios: (1) gain or loss on investments in securities rise as using Lower of Cost or Market Method whereas it fluctuates irregularly as using Fair Value Method; (2) gain or loss on investments in securities fluctuates irregularly as using Lower of Cost or Market Method whereas it rise as using Fair Value Method. Alternatively, the second experiment is a within-subjects design to investigate that it is conscious or unconscious bias behavior, if investors have different judgments on the same economic substance. The result of first experiment shows that the focus group simply fixated on reported income rather than the substance of the information. Thus, the first experiment concludes that alternative presentations of financial information do affect investors’ judgments. The second experiment shows that different presentations of financial information do not affect its readers in their investment judgments, when giving them the financial statement using Lower of Cost or Market Method and it using Fair Value Method meanwhile. Consequently, it is unconscious bias behavior that investors generally have different judgments on the same economic substance.