To improve investors' valuation of accounting earnings in emerging markets: evidence from Taiwan
✍ Scribed by Anlin Chen; Lanfeng Kao; Meilan Tsao
- Publisher
- Wiley (John Wiley & Sons)
- Year
- 2010
- Tongue
- English
- Weight
- 144 KB
- Volume
- 27
- Category
- Article
- ISSN
- 0825-0383
- DOI
- 10.1002/cjas.155
No coin nor oath required. For personal study only.
✦ Synopsis
The valuation of accounting earnings is related to the level of earnings management used by the fi rm. In emerging markets where earnings management is typically pervasive, investors lose confi dence in accounting earnings and thus tend to under-value earnings. Using data from Taiwan, we show that better governance characteristics are associated with improved investor valuation of accounting earnings. Under weaker governance structures, such as excessive control on the part of majority shareholders, small board size, and chief executive offi cer/chairman of the board duality, the market tends to under-value accounting earnings. Reducing controlling shareholders' ownership, increasing board size, and reinforcing the monitoring function of the board improves investors' ability to value accounting earnings.