Earnings management and seasoned equity offerings: evidence from Taiwan started Go Incubation Board for Startup and Acceleration firms

  • 99 Views
  • 2 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Although a large body of empirical research focuses on listed companies, less is done regarding small and medium enterprises. Under the authorities’ support, Taipei Exchange (TPEx) started Go Incubation Board for Startup and Acceleration Firms (GISA) in January 2014. This research yields insight into earnings management activities around seasoned equity offerings (SEO) based on GISA firms in Taiwan and the effectiveness of external corporate governance. Data for the study come from the GISA Market Observation Post System of TPEx and Taiwan Economic Journal. The results reveal that GISA firms with the incentives of raising funds are prone to upward accrual-based earnings management during SEO to avoid long-term negative consequences. Especially, firms with paid-in capital more than TWD (NT$) 30 million, higher fundraising amounts, or smaller-sized firms, tend to increase discretionary accruals. Finally, Certified Public Accountants (CPAs) and Big 4 accounting firms effectively serve as external corporate governance on mitigating earnings management. This study makes some contributions to GISA literature. First, expands the prior research, the different earnings management level before and listed on GISA, to the firms listed on GISA. Second, link up the relationship between the SEO and earnings management of GISA in Taiwan. Finally, it provides several contributions to regulators, for instance, the effectiveness of the counseling system provided by CPAs or Big 4 accounting firms. Also, the CPAs and Big 4 accounting firms serve as supervisors on corporate governance.

view full abstract hide full abstract
    • Table 1. Comparison of capital markets in Taiwan
    • Table 2. Sample selection
    • Table 3. Sample by industry
    • Table 4. Descriptive statistics for GISA firms
    • Table 5. Person correlation coefficient and Spearman rank correlation coefficient
    • Table 6. Main results for H1 (DA and SEO)
    • Table 7. Main results for H2 (DA and external corporate governance)
    • Table A1. Variables related to earnings management
    • Table A2. Variables related to research model
    • Formal Analysis
      An-An Chiu, Shaio Yan Huang, Wei-Hua Lin
    • Investigation
      An-An Chiu, Shaio Yan Huang
    • Resources
      An-An Chiu, Ling-Na Chen, Wei-Hua Lin
    • Supervision
      An-An Chiu, Shaio Yan Huang
    • Validation
      An-An Chiu, Shaio Yan Huang, Ling-Na Chen
    • Writing – original draft
      An-An Chiu, Ling-Na Chen
    • Writing – review & editing
      An-An Chiu, Shaio Yan Huang, Ling-Na Chen
    • Conceptualization
      Shaio Yan Huang
    • Data curation
      Ling-Na Chen, Wei-Hua Lin
    • Funding acquisition
      Ling-Na Chen
    • Methodology
      Ling-Na Chen, Wei-Hua Lin
    • Project administration
      Ling-Na Chen
    • Software
      Ling-Na Chen, Wei-Hua Lin