The Effect of Business Group Diversification on the Affiliated Firm’s Earnings Management

• Main Author: 邱玉均
• Other Authors: 張文瀞
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/70411778709097791850

碩士 === 國立彰化師範大學 === 會計學系 === 96 === Recently, business groups are blooming and playing the important roles in economic and industrial development in Taiwan. However, the groups’ diversification strategies often result in high risks. If the earnings quality is manipulated by the management, it will cause the investors to underestimate the risk which diversification strategy will bring. The purpose of this research is to examine the correlation between groups’ diversification strategies and the earnings management. The observation of diversification level divides into 3 kinds, respectively are operational diversification(unrelated diversification, related diversification and global diversification), financial diversification and the influence of operational diversification(unrelated diversification, related diversification) and research and development expense's correlation. This research chooses the various group's subordinates from 2003 to 2006 as observations. The final sample size is 980. The results show that： 1. Greater related diversification deteriorated earnings quality. Therefore, operational diversification can indeed influence the earnings quality. 2. If corporate had issued overseas bonds, the management did income-increasing earnings management more. 3. When the company had simultaneously devoted to the unrelated diversification and research and development expense, it deteriorated earnings quality. The result implies both strategies were not fully displayed. Therefore, the firm’s value weren’t maximized which would result in more earnings management behaviors. 4. When the company had simultaneously devoted to the related diversification and research and development expense, it improved earnings quality. The result implies both strategies brought synergy. Therefore, the firm’s value were maximized which would result in less earnings management behaviors. Keywords: business group, diversification, research and development, earnings management