Affordable Access

Publisher Website

Effect of disclosure regulation on earnings management through related-party transactions: Evidence from Taiwanese firms operating in China

Authors
Journal
Journal of Accounting and Public Policy
0278-4254
Publisher
Elsevier
Volume
32
Issue
4
Identifiers
DOI: 10.1016/j.jaccpubpol.2013.04.003

Abstract

Abstract This study examines the effect of disclosure regulation on earnings management using Taiwanese companies conducting transactions with China as the institutional setting. Measuring earnings management by the amount of discretionary accruals (DACCs), the study shows that disclosure regulation mitigates DACCs of Taiwanese firms engaging in related-party transactions with Chinese entities. Following enactment of the disclosure regulation in November 2000, DACCs among Taiwanese enterprises conducting transactions via offshore affiliates dropped. While the disclosure regulation helps to reduce earnings management, this study reports that such effect is asymmetric between high-tech firms and non–high-tech firms. Specifically, the disclosure regulation is effective in reducing earnings management among firms in non–high-tech sectors. However, such effect is not significant among firms in high-tech sectors. This study discusses the implications of empirical findings for corporate management, regulatory agencies, and firm stakeholders.

There are no comments yet on this publication. Be the first to share your thoughts.