Accrual-based Earnings Management, Financial Crisis and the Value-relevance of Accounting Numbers

• Main Authors: Chih-ying Lin, 林芝瑩
• Other Authors: Chu-yang Chien
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/74385158786726520198

碩士 === 國立雲林科技大學 === 會計系碩士班 === 101 === The earnings reporting provides users with the most immediate information of a company’s financial condition and operating activities, in turn, affects investors investing evaluation and/or stakeholders’ loan decision-making. Therefore, whether there is relationship between earnings quality and the value-relevance of financial statement information is a critical issue and calls for examination. To improve the earnings information, the generally accepted accounting principles (GAAP) provides the managers the empowered authorization via the discretionary choice of accounting methods and/or the recognized of earnings reporting. It makes the managerial accrual-based earnings management to some extent influences the quality of accounting numbers, particularly, the relative value-relevance of earnings and equity of book value. Thus, the present study uses the absolute value of discretionary accruals which is measured by the Kothari et al. (2005) modified Jones model to proxy the earnings quality and examines the influence of accrual-based earnings management on the relative relavalue relevance changes of earnings and equity book value. The empirical results demonstrate that the large magnitude of discretionary accruals (DA) deteriorates the relative value-relevance of earnings variable, yet, increases the value-relevance of equity book value. It suggests that the accrual-based earnings management has negative impact on the value-relevance of earnings, yet, has positive impact on the value-relevance of equity book value. It implies that evaluation process of investors will raise their reliance on balance sheet but lower on income statement when firms with large magnitude of discretionary accruals. This study demonstrates some diagnostic checks and evidences the results are robust to the various specifications.