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臺大管理論叢
第
27
卷第
4
期
8 Corporate governance mechanism is a framework of legal, institutional, and cultural factors shaping the
patterns of influence that stakeholders exert on managerial decision-making (Weimer and Pape, 1999). The
board of directors are viewed as the most important internal control mechanism responsible for disciplining
the actions of insiders (Fama and Jensen, 1983). As opposed to inside directors, outside directors have a duty
to monitor managers and help reduce the agency problem (Cheung, Chung, Tan, and Wang, 2013). Foreign
directors can often weaken a board’s monitoring effectiveness, and thus lead to greater agency problems
between managers and shareholders and ultimately poorer firm performance. However, foreign directors can
enhance the advisory capability of boards, especially those with major foreign operations or aspirations to
expand internationally (Masulis, Wang, and Xie, 2012). This study incorporates additional control variables
which are the proportion of outside directors and supervisors on the board (OUTt) and the proportion of
foreign directors and supervisors on the board (FOREIGN
t
). To consider the company risk, this study also
includes the CAPM beta (BETA
t
) in the empirical regressions. The observations are reduced to 5,601 in this
further examination. We rerun our analyses and compute standard errors clustered by industry (Petersen,
2009). The results again support our primary findings.
9 Extant studies reveal that income smoothing firms will likely have lower earnings surprises. We note that
earnings surprises are positively related to stock returns. This study thus controls for earnings surprises and
reruns the equations. The additional diagnoses do not qualitatively change the primary results.
smoothing in the post-deregulation period. These results suggest that QFIIs with short-term
oriented trading strategies exacerbated the opportunistic role after the deregulation of QFIIs.
Thus, the deregulating effect of the QFIIs’ ownership restriction is considered to influence
the role of QFIIs in earnings reporting and suggests that it does take place, which in turn,
affects the informative component of earnings for firms with income smoothing.
8,9