Earnings Quality and Timeliness of financial statements

• Main Authors: Chiang, Yu-Hsiu, 江雨綉
• Other Authors: Fan, Hung-Shu
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/91375035631836499564

碩士 === 輔仁大學 === 會計學系碩士班 === 94 === Relevance and reliability are the two primary accounting information qualities that make accounting information useful for decision making (SFAC No.2). To be relevant, accounting information shall have predictive value, feedback value as well as timeliness. For information to be with timeliness, it must be available to decision makers before it loses its capacity to influence their decisions. Accounting information is reliable to the extent that it is verifiable, is a faithful representation, and is reasonably free of error and bias. The quality of earnings is the most important characteristic of reliability. Investors depend largely on the financial statements, which are compiled and released regularly with two vital characteristics of relevance and reliability by a listed company, to evaluate the operating performance of the company. This study intends to examine the reciprocal relationship between these vital characteristics of accounting information, i.e. the timeliness of financial statements and the quality of earnings of a company. This study adopts the annual report approval day, which is the date that the board of directors approves annual report, and timeliness gap, defined as the difference between consecutive two annual report approval days, to measure the timeliness of financial statements. And, this study uses discretionary accruals, estimated by the crosssectional Jones model and modified Jones model, to proxy earnings quality. The emrical results are summaried as follows: 1. The length of period from balance sheet day to the annual report approval day is significantly positive-associated with the absolute discretionary accruals. That is, more lackness of timeliness of financial statements, more earnings management. 2. Regarding the reciprocal relationship between the timeliness gap of annual reports and earnings management, this study finds that the timeliness gap and the absolute discretionary accruals are mutual dependendant. That evidences that listed firms use the timeliness of reports and earnings management in the same time to achieve their predetermined goals. 3. Comparing to the last year annual report approval day, this study use two dummy variables: Early (earlier than last year annual report approval day) and Late (late than last year annual report approval day) to mark the whole sample and finds that the Late variable is significantly positive-associated with the absolute discretionary accruals. This means that more earnings management behaviors are engaged in the annual report that is approved late by firm’s board of directors.