| Summary: | 碩士 === 南華大學 === 管理科學研究所 === 93 === Conservatism plays an important role in companies’ financial reporting. However overusing of conservatism will diminish the relevance and economic faithfulness of the information. In addition, financial reporting is the primary source for assessing a company’s economic performance. The quality of financial reporting determines the reliability of information and consequently affects the quality of investing decision of investors and other stakeholders.
Following Basu’s (1997) conservatism model, this paper examines Taiwanese listed companies for a sample period of 1993-2003 and analyzes the effects of company-specific institutional factors on the quality of accounting information. The study extends Basu (1997) analysis to test the effect of the operating cash flows and net book value on the timeliness of earnings. The empirical results show that Taiwanese companies has the tendency to accelerate timeliness losses recognition on earnings, operating cash flows and net book value, indicating an increased degree of conservatism over time. Moreover, the litigation and market performance are important attribute of the supply of conservatism.
In addition, the results from assessing company-specific institutional factors provide evidence that a company possessed of certain company-specific institutional factors will exhibit more conservative financial reporting (i.e., large company size, higher leverage ratio, low return on equity, non-government ownership, non-financial institutions ownership, and low ratio of legal person ownership). Therefore, investor and creditors could utilize the company-specific factors to determine the degree of a company’s conservatism which can provide decision-useful information.
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