Relation between Earnings Management and Information Asymmetry: A Quantile Regression Approach

  • 郭 怡君

Student thesis: Master's Thesis

Abstract

The aim of this study is to examine the effects of earnings management on information asymmetry and further discuss whether the influences are non-uniform between different degrees of information asymmetry There are two perspectives explaining earnings management in literatures: managerial opportunism and information communication Prior studies report seemingly conflicting evidences on whether earnings management enhances or reduces information asymmetry This study adopts the quantile regression model trying to provide an explanation for the inconsistencies in findings of prior research The advantage of QR method is providing an alternative approach to evaluate the relative explanatory power of independent variables in various conditions Our sample contains 4 981 U S nonfinancial firms from 1988 to 2014 The empirical results show that the effect of earnings management on information asymmetry changes depending on the quantile level of information asymmetry Regarding firms with high information asymmetry the information quality of their financial reporting is perceived low and earnings management is viewed as a managerial opportunism strategy gaining managers’ own benefits since they have more private information which in turn aggravates the level of firms’ information asymmetry Conversely as for low information asymmetry firms market investors consider their information financial reporting quality high and earnings management are expected to be an instrument to convey information which reduce firms’ extent of information asymmetry accordingly
Date of Award2015 Jun 18
Original languageEnglish
SupervisorYu-Hong Liu (Supervisor)

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