Is earnings management opportunistic or beneficial in Taiwan?

  •  Feng-Li Lin    


This paper analyzes whether discretionary accruals affects firm value under the corporate governance mechanism via a panel of 277 Taiwanese listed companies from 1997 to 2007. Our results show that when managerial ownership is less than 9.67%, managers may engage in opportunistic earnings management. However, while managerial ownership higher than 9.67%, managers may tilt toward efficient earnings management. Only efficient earnings management is found in either board size less than 9 members or more than 12 members and institutional ownership less than 43.8%.  Also, small board has greater impact on efficient earnings management than larger board. When the proportion of outside directors is below 38.73%, they can effectively supervise managers to engage in efficient earnings management.

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