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公司盈餘平穩化行為與盈餘資訊性之關係－合格境外機構投資者角色之檢測
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1. Introduction
Prior studies (e.g., DeFond and Park, 1997; Tucker and Zarowin, 2006) document that
the underlying motivation for managers’ income smoothing is to communicate private
information about future earnings. This hypothesis suggests that income smoothing can
improve the forecasting capability of current earnings, while at the same time, it also
increases the earnings informativeness. Note that Tucker and Zarowin (2006) have shown
strong evidence on the positive association between income smoothing and earnings
informativeness, and support the notion that income smoothing could enhance earnings
informativeness. We extend this stream of research to examine the role of institutional
investors, i.e., QFIIs, on the earnings informativeness for firms with income smoothing.
Institutional investors are capable of analyzing financial statements more proficiently
than other investors to protect their magnitude of wealth invested (Velury and Jenkins, 2006).
Carlson and Bathala (1997) suggest that a difference in institutional ownership can provide
an explanation for income smoothing from the standpoint of informational asymmetry,
monitoring and control processes. Prior studies also provided evidence that firms with higher
institutional ownership are less likely to manage earnings (e.g., Bushee, 1998; Jiambalvo,
Rajgopal, and Venkatachalam, 2002; among others). This study conjectures the
informativeness of earnings for managers’ income smoothing is associated with the firm’s
institutional ownership and/or institutional investors’ trading strategies. If institutional
investors are better monitors of managerial opportunistic earnings reporting, the quality of
earnings enhances with the increases in the magnitude of institutional shareholdings (denoted
as the monitoring hypothesis). However, recent studies also highlight the importance of
explicitly considering the short-term oriented investing behavior of institutional investors
(denoted as the opportunism hypothesis) when investigating the association between
institutional ownership and managerial earnings reporting (Bushee, 1998; Koh and Hsu,
2005; Velury and Jenkins, 2006; Koh, 2007; Yan and Zhang, 2009; among others). Thus, the
role of institutional investors on the informativeness of earnings for firms with income
smoothing remains an open question.
QFIIs were allowed to participate in Taiwan’s stocks market in 1991, yet, were
restricted to owning shares and capitals at the initial stage of openness. As the trading
restrictions on QFIIs have been relaxed in 2003, the trading volume by these institutional
investors has increased. QFIIs are typically well funded and have better investment
capabilities than other investors. When QFIIs trade in an emerging capital market, such as
Taiwan, they are big fish playing games in small ponds and create significant influences in