| Summary: | 碩士 === 東吳大學 === 會計學系 === 94 === For a long time, small and medium sized enterprises (SMEs) plays an important role in devoting to Taiwanese economy prosperity. But the inadequate ability in financing and lacking of ways to loan fund are SMEs’ major problems for operating business, which financial institutions doubt the reliability of SMEs financial statement is one of the reasons. Previous empirical studies show that enterprises indeed have the motives in earnings management that makes the reliability of financial statement reduce, and it leads to financial institutions cannot trust the financial reports. However, due to the restriction of the data, the study about enterprises’ earnings management mainly focuses on the public company; nevertheless, the previous literature shows that enterprises manipulate earnings in order to prettify the financial reports and this management is influenced by the company size and the separate level of owners and managers. Therefore, it is a question that the earnings management phenomenon in the public can be inferred to the SMEs.
This study aims at SMEs that finance over thirty million NT dollars from financial institutions, using the pooled cross-sectional distribution approach developed by Burgstahlar and Dichev（1997） and Degeorge et al.（1999）to analyze whether it is a common phenomenon from 1997 to 2003 that Taiwan SMEs in the demand of funds attempt to manipulate earnings to exceed the “zero earnings threshold,” and apply the contingency table Chi-squared test to examine the relationship between earnings management and audit quality, with the Big4/non-Big4 to represent the high/low audit quality.
The empirical results show: when SMEs face the small deficit situation, they will intend to manipulate earnings to positive earnings to avoid the negative status. Basically, Manipulating earnings to exceed the “zero earnings threshold” is not affected by different industries and economic conditions, but service industry is difficult to manipulate earnings to small positive earnings because it lacks tools to manipulate earnings than other industries. The Ministry of Finance requests enterprises which finance over thirty million NT dollars from financial institutions should provide financial statement with certification of finance. Therefore, SMEs tend to certification of finance of the low audit quality firms in order to exceed the “zero earnings threshold” earnings objective.
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