The Influence of Earnings Management on Credit Ratings

• Main Authors: Yu-Shi Huang, 黃雨詩
• Other Authors: Yi-Hsing Liao
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/66982542382560139194

碩士 === 中原大學 === 會計研究所 === 100 === This study explores whether earnings management has an effect on credit rating. Due to asymmetric information between managers and outside investors, earnings may be managed for window dressing and then earnings quality may be impacted. Credit rating institutions are also financial information users and need plenty of accounting data during rating. This study therefore tries to investigate whether rating institutions can obtain the essential message of company’s real performance from accounting information and accordingly reflect it on the suitable level of credit rating.This study selects general industry firms publicly traded in Taiwan from 2004 to 2009 as samples and adopts absolute discretionary accruals under the Modified Jones Model to measure the degree of earnings management. Besides, this study adopts Taiwan Corporate Credit Risk Index（TCRI）obtained from Taiwan Economic Journal（TEJ）as dependent variables to run ordered probit regression. The empirical results show that the higher the discretionary accruals, the poorer the credit rating will be. Consequently, rating institutions have the ability to detect the intention of earnings management during rating and accordingly reflect a poorer score for the company. Furthermore, this study divides the discretionary accruals by positive value and negative value to separately detect their influence on TCRI. The empirical results show that earning-increasing management has negative effect on credit rating but earning-decreasing management has positive effect on credit rating.