| Summary: | 碩士 === 國立彰化師範大學 === 會計學系 === 103 === Listed and over-the-counter firms from 1998 to 2013 in Taiwan were used as research samples for exploring the effect of political connections on the earnings management of a firm. To obtain increased resources or advantageous policies, firms tend to actively build close relationships with political parties or politicians. Such a relationship is called a political connection. Establishing a political connection may yield a number of benefits. For example, previous studies have reported that firms establishing political connections frequently exhibit higher performance levels, receive government subsidies more easily, pay lower taxes, or receive bank financing more easily than firms without political connections do. We explored the effect of corporate political connections on corporate earnings management because most of the previous studies have focused on the effect of political connections on corporate performance or operations,with few having investigated the effect of political connections on earnings management. The four major incentives of corporate earnings management (i.e., capital market incentive, contract incentive, taxation incentive, and political cost incentive) may decrease because of the benefits earned from establishing political connections. The empirical results revealed that the firms with higher political connections were less likely to perform earnings management.
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