Investment in China、Accounting Conservatism and Earning Persistence

• Main Authors: Chiao-Ru Yang, 楊巧如
• Other Authors: Shu-Hua Lee
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/96777938022169703761

碩士 === 國立臺北大學 === 會計學系 === 102 === Due to a special political relationship between Taiwan and mainland China, Taiwan government has set certain rules to request enterprises investing in the mainland China to comply with the investment limits according to the company size. Such rules and regulations increase government regulatory cost significantly, therefore the government requests enterprises which have investment in the mainland China near the limits using more conservative accounting strategy to decrease the political cost to protect the benefit of investors. Earnings persistence provides useful information to the user of financial statement for decision making. Several studies find that conservatism is negatively related to earnings persistence and different types of earnings have different effect to earnings persistence. In this study, net income has been separated into four different types of earning to compare the relationship among investment in China, accounting conservatism, and earning persistence base on the population of Taiwanese companies having investment in China from 2001 to 2012. The findings are summarized as follows: 1.The relationship between earning persistence coefficient and levels of conservatism is found to fluctuate and showing bimodal behavior with the peaks at the second and fourth levels of conservatism. The trend is different from earlier findings of overall nonlinear trend with single peak at level two. 2.When conservatism increase, the persistence of China investment income under equity method is found to show nonlinear behavior with first increasing and then decreasing trends. 3.If sample firms are divided by the ratio of China investment scale to investment limit, it is found that sample firms with higher ratio of China investment scale to investment limit have higher accounting conservatism and hence worse earning persistence.