An examination of relation between environmental disclosure and earnings management-Illegal Dumping of Toxic Industrial Waste of Formosa Plastics Inc.

• Main Authors: Ying-Chin Yeh, 葉穎瑾
• Other Authors: Ming-Lei Chang
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/273yv3

碩士 === 銘傳大學 === 會計學系碩士班 === 93 === Companies could have much political pressure because of the unexpected environment pollution. For this reason, we apply political-cost hypothesis to examine within the context of the earnings management response by polluted industries following the December, 1998 illegal dumping of toxic industrial waste of Formosa Plastics Inc. Furthermore, this study examines the relation between the level of environmental disclosure and the extent of earnings management in response to regulatory threat. We use OLS analysis to examine 7 polluted industries listed in Taiwan Stock Exchange Corporation. The results from these tests support the political-cost hypothesis and are consistent with the view that managers adjust earnings in response to environmental pollution events. In addition, companies with higher levels of environmental disclosures in their financial reports exhibit lower levels of earnings management. In other word, it indicates that companies with more extensive environmental disclosures in their financial report would have less incentive to manage their earnings figures downwards for reducing the sensitiveness of political pressure. These results are consistent with the argument that corporate management believes environmental disclosure is an effective tool for reducing sensitivity to political pressure.