臺大管理論叢 NTU Management Review VOL.29 NO.1

Earnings Informativeness of Long-Lived Assets Impairment Recognized and Reversals 206 2.2 A Brief Literature Review The return-earnings relation has widely studied (e.g., Ball and Brown, 1968; Beaver, Lambert, and Morse, 1980; Strong and Walker, 1993; Kothari, 2001; Jiambalvo, Rajgopal, and Venkatachalam, 2002). Collins et al. (1994) investigated the relation between current annual returns and future annual earnings, finding that a large proportion of current stock returns can be explained by future earnings (i.e., FERC). This finding suggests the weak relation between stock returns and contemporaneous earnings is caused by investors, to some extent, anticipating and pricing future earnings. Following Collins et al. (1994), several studies have investigated whether variations in firm disclosure practices affect the strength of the relationship between current stock returns and future earnings. For example, Gelb and Zarowin (2002) and Lundholm and Myers (2002) found that firms with more informative disclosures have higher future earnings response coefficients (FERCs). Other studies have investigated the effect of specific types of disclosures on the relation between current returns and future earnings. Ettredge et al. (2005) found that FERCs are higher for firms that began disclosing multiple segments under SFAS No. 131. Tucker and Zarowin (2006) found that changes in the current stock price of higher-smoothing firms contain more information about future earnings. More recently, Orpurt and Zang (2009) found that FERCs are higher when firms prepare their cash flow statements using the direct approach rather than the indirect approach. Choi et al. (2011) found that FERCs are higher for firms that both issue management earnings forecasts and these forecasts are more frequent and precise. Overall, these papers find that FERCs increase as more information about future earnings becomes available. Several strands of research have investigated asset impairment. Prior studies focusing on market reaction have shown that the announcement of an impairment loss suggests the decreased economic value of assets and results in negative market reaction (e.g., Strong and Meyer, 1987; Elliott and Shaw, 1988; Zucca and Campbell, 1992; Rees, Gill, and Gore, 1996; Francis, Hanna, and Vincent, 1996; Comprix, 2000). From the motives perspective, Rees et al. (1996) found that write-off firms experience a permanent shift in their accrual balances in the write-off year. Francis et al. (1996) found that firms with write-offs are more likely to subsequently undergo changes in senior management. Empirical evidence from Thailand shows that managers tend to recognize impairment loss to smooth earnings (Peetathawatchai and Acaranupong, 2012). In addition, standards in place or changes in impairment accounting standards have been shown to be associated