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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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decrease the informativeness of the current earnings (e.g., Fudenberg and Tirole, 1995; Arya,
Glover, and Sunder, 1998). DeFond and Park (1997) pointed out that current earnings are
associated with income smoothing, yet, this association is much more powerful when
expected future relative performance is considered. Namely, a firm’s accounting choices may
be opportunistically motivated in the depressed period, because it borrows future earnings to
improve current failing earnings but does not have explicitly brilliant performance in the
future. Thus, the earnings informativeness for firms with income smoothing can be taken as
an empirical issue. Consequently, we firstly use the model suggested by Tucker and Zarowin
(2006) to distinguish the informative or opportunistic role of managerial income smoothing
in Taiwan. Having done that, we will examine our hypotheses.
As for the institutional ownership literature, institutional investors depending on their
investing horizons can either encourage short-term managerial behavior (e.g., Bhide, 1993;
Porter, 1992) or actively monitor firms, thus constraining managerial discretion (e.g.,
Bushee, 1998). Institutional investors are presumably interested in using all types of value-
relevant financial information to establish and evaluate their investments. Brous and Kini
(1994) have documented evidence consistent with the active monitoring hypothesis, such as
improvement in stock price performance, firm profitability, and earnings management.
Bushee (1998) states that institutional investors monitoring can occur explicitly through
corporate governance practices or implicitly through information gathering and correctly
pricing the impact of managerial decisions. Recently, Velury and Jenkins (2006) further find
that when the level of institutional ownership is sufficiently high, such monitoring arguably
discourages managers from providing financial reports that are “noisy”.
However, Bhojraj and Sengupta (2003) suggest that concentrated institutional
ownership could result in institutions influencing firm decisions that could prove costly to
other providers of capital (private benefits hypothesis of blockholding). Bhide (1993) also
argues that the frequent trading strategy and fragmented shareholdings by institutional
investors discourage them from becoming actively involved in the corporate governance of
their invested firms. This school of thought holds that institutional investors are inherently
short-term oriented traders. Consistent with this stream of research, Bushee (2001)
documented that transient institutional investors exhibit a strong preference for near-term
earnings and are sensitive to current earnings with aggressive earnings management. This
argument is supported by studies such as Koh (2003), Koh and Hsu (2005), and Yan and
Zhang (2009). However, Koh (2005) finds that transient institutional ownership is not
systematically associated with aggressive earnings reporting and that it is evident only