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

Earnings Informativeness of Long-Lived Assets Impairment Recognized and Reversals 218 potential sample attrition and survivorship bias (Hsiao, 1986). We thus use an unbalanced- panel regression which controls for firm characteristics. We also add year dummies to control for the year effect in all regressions. To test Hypotheses H1 and H2, we expand the earnings informativeness model suggested by Collins et al. (1994), Lundholm and Myers (2002) and Tucker and Zarowin (2006) by incorporating the magnitude of asset impairment (IM t ) variable, the variables which interact with IM t and the other explained variables. The empirical regression is presented as follows: R t = β 0 + β 1 X t-1 + β 2 X t + β 3 X t3 + β 4 R t3 + β 5 IM t + β 6 IM t *X t-1 + β 7 IM t *X t + β 8 IM t *X t3 + β 9 IM t *R t3 + β 10 LEV t + β 11 MB t + β 12 SIZE t + ε t (1) where: R t : a firm’s ex-dividend annual stock return in year t . X t-1 : a firm’s earnings per share excluding extraordinary items in year t -1, deflated by the stock price at the beginning of year t . X t : a firm’s earnings per share excluding extraordinary items in year t , deflated by the stock price at the beginning of year t . X t3 : a firm’s sum of earnings per share for three years excluding extraordinary items for year t +1 through t +3, deflated by the stock price at the beginning of year t . R t3 : a firm’s compounded annual stock returns for year t +1 through t +3. IM t : a firm’s magnitude of asset impairment in year t , deflated by total assets at the beginning of year t . LEV t : a firm’s leverage measured as total debt divided by total assets at the end of the fiscal year t . MB t : a firm’s market-to-book ratio measured as the market value of equity divided by book value of equity at the end of the fiscal year t . SIZE t : a firm’s size measured by the natural logarithm of book value of total assets at the end of the fiscal year t . ε t : the error term.