| Summary: | 碩士 === 國立臺北大學 === 合作經濟學系 === 92 === As the high development of capital market in U.S., the separation between control right and cash flow right is becoming significant. It makes famous principal-agent problem. After Enron event in 2001, the distrust between investors and insider’s forms “prisoners’ dilemma.”
Social capital, also known as social trust, is a tendency to improve social efficiency and cooperate with others in order to mitigate the problem of “prisoners’ dilemma.” So with the highly social capital, people tend to trust others. And then the appearance of “prisoners’ dilemma” problem is getting lower. Thus, we are going to examine in three aspects:
1.The lower the extent to which firms manage earnings, the higher the trust in large firms?
2.Does the high investor protection drive to lower extent to which firms manage earnings?
3.Does the high social trust drive to lower extent to which firms manage earnings?
This research uses the trust data in Gallup and World Values Survey, from 1991 to 2002. We find that the impact of investor protection and social trust on earnings management depends on which kind of earnings management firms use, but lower extent to which firms manage earnings drives to higher trust in large firms.
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