Does New Revised Financial Accounting Standards No.10 Reduce Manager’s Over-investment Behavior?

• Main Authors: Pi-ChiLin, 林丕淇
• Other Authors: Jeng-Fang Chen
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/03914296847052982192

碩士 === 國立成功大學 === 財務金融研究所碩士在職專班 === 102 === The new revised R.O.C SFAS (statement of financial accounting standards) No.10 stipulate that the cost of idle facilities should be recognized as current-period costs rather than capitalized as inventory costs when a firm’s actual production is lower than its normal level. When the managers are engaged in over-investment, the loss will soon be presented in financial statements because of the timely loss recognition effect of new revised SFAS 10. The purpose of this study is to investigate whether the adoption of new revised SFAS 10 will reduce manager’s over-investment behavior. Using a sample from Taiwan listed companies during the period of 2006~2011 with multiple linear regression analysis, I find that after the adoption of new revised SFAS No. 10, over-investment in capital expenditures is lower, but the effect tends to be small and statistically insignificant. However, if I only focus on firms that are higher capital intensive such as firms in plastics, rubber and chemical industries, over-investment in capital expenditure is significantly lower following the adoption of new revised SFAS No, 10. The results imply that the constraint effect of the new revised SFAS No. 10 on over-investment can only be applied to firms in capital intensive industries.