Agency Cost, Auditor Tenure and Financial Forecast Errors

• Main Authors: Chang, Hui-Ju, 張慧如
• Other Authors: Su, Yu-Hui
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/07169055526539995622

碩士 === 東吳大學 === 會計學系 === 92 === When firms tend to manage earnings, the information about financial forecast error or the accuracy of financial forecast may be manipulated. Prior studies found the negative relationship between directors’ shareholdings and financial forecast error, but they are not sufficiently supported by theory. First, this thesis discusses the association between directors’ shareholdings and financial forecast error under entrenchment and alignment effect by the concept of signaling hypothesis. Second, this thesis is to investigate the reason of higher directors’ shareholdings cause higher financial forecast’s accuracy. Finally, this thesis discusses the association between auditor tenure and financial forecast error. I have collected 2,813 samples on listed company in the period 1998-2002. The primary results are as follows: 1. The empirical results find that directors’ shareholdings is significant negative related to the financial forecast error. When the entire sample is divided into a subsample of high agency cost firms and a subsample of low agency cost firms, it shows that the negative relationship exists only in high agency cost firms. The findings imply that when agency conflict problem is serious, higher director ownership is related to smaller forecast error. 2. The empirical results find that directors’ shareholdings is significant negative related to the conservative degree of earnings forecast. When the entire sample is divided into a subsample of high agency cost firms and a subsample of low agency cost firms, it shows that the negative relationship exists only in high agency cost firms. Besides conservative financial forecast, earnings management is also the reason of higher directors’ shareholdings firms related to smaller forecast error. 3. Adding auditor tenure factor, the empirical results still find the relation between financial forecast error and directors’ shareholdings. There is no obvious evidences supporting that auditor tenure is a direct significant factor of financial forecast error. And no obvious evidences show that longer auditor tenure related to more earnings management in order to reduce financial forecast error by the firms.