Auditor Industrial Specialization and Seasoned Equity Offering Firms’ Earnings Disclosure

• Main Authors: Chia-Yuan Hsu, 許家源
• Other Authors: Ching-Lung Chen
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/34673409373273830875

碩士 === 朝陽科技大學 === 會計所 === 94 === Earnings management remains a popular topic of debate and discussion among investor, regulator, and the public. Prior studies suggest that abnormal accounting accruals are unusually high around seasoned equity offers (SEO) and document that higher quality auditor did constrain the degree of earnings management. This study uses auditor industrial specialization to measure the audit quality and examines the relationship between auditor industrial specialization and seasoned equity offering firms’ aggressive earnings reporting behavior. The present study adopts 446 Taiwan SEO firms during the period 1996-2004 to examine whether the SEO firms did implement aggressive earnings reporting before they issue new equity. It is found that the average discretionary accruals of SEO firms are higher in the year as they issue the new equity in opposition to the counterpart year before or after the SEO. In addition, the empirical result did not support the conjecture that auditor industrial specialization can constrain SEO firms’ aggressive earnings reporting behavior. Following Louis & Robinson (2005), who suggest abnormal accrual as a signal of managerial optimism rather than managerial opportunism reporting, the present study conjectures that the announcements of seasoned equity offering in Taiwan might be associated with managerial optimism signals. Thus, the incentive of auditor to constrain SEO firms’ aggressive earnings reporting behavior is decreased.