The Impact of Performance of Foreign Exchange on Earnings Management

• Main Authors: HUANG, LI-WEN, 黃立文
• Other Authors: SU, YU-HUI
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/395spq

碩士 === 東吳大學 === 會計學系 === 105 === Taiwan is an island with relatively small land area, and lack of natural resources. During the time of economic takeoff, the export performance is the main source of the economy in Taiwan. Hence, the exchange rate volatility has an impact on the benefits of the import and export trade to the enterprises. While Taiwan aggressively internationalizes the economy, and also the enterprises continue to expand the oversea markets, the first challenge faced is the risk of exchange rate volatility. This research investigates that when the firm is exposed to the high risk on the performance of foreign exchange, and also the number of gains or losses from the foreign exchange affects the financial statement due to the degree of exchange rate volatility, will the managers manipulate earnings to smooth income, and reach the goal of window dressing the financial statements? Therefore, from the viewpoints of the earning management, the study examines that will the performance of foreign exchange which generated from the exchange rate volatility become the motive that the managers smooth income? The research is not only to observe whether the performance of foreign exchange on a yearly basis becomes the motivation of manipulating earnings, but also to watch will the company with high seasonal volatility in the exchange gains and losses conduct more earnings management? The combined survey is collected from listed and OTC firms in Taiwan during 2013-2015, 1816 companies in total. With Modified Jones Model from Dechow et al. (1995), the discretionary accruals is the proxy variable for dependent variables of earnings management. Via Regression Analysis, the study finds out that when the firms encounter high impacts of the performance on foreign exchange, it triggers the managers’ motivation of applying earnings management. However, when the seasonal volatility of the performance on foreign exchange gets higher, the frequency of the income manipulation on its financial statement is higher. This hypothesis has negative support.