臺大管理論叢 NTU Management Review VOL.30 NO.2

149 NTU Management Review Vol. 30 No. 2 Aug. 2020 First, Ordinary Least Squares (OLS) standard errors and test statistics are better specified when the regression uses a leading variable (i.e., stock prices and sales) as the independent variable, and the lagging variable (i.e., changes in net assets as a proxy for OCI adjustments) as the dependent variable (see, Basu, 1997). Second, sales and observable quoted stock prices from arm’s length transactions are two of the best estimates for fair value (O’Brien, 2005). 4.3 Extension of Information Inputs H2 predicts that the asymmetric OCI adjustments are due to managerial discretion rather than information inadequacy. To test H2, we extend the length of the information windows from two to four fiscal years. When the information windows are extended to be a two-year period, we compare information inputs over years t to t – 1 with information inputs over years t – 2 to t – 3. In this case, managers adjust OCI from the end of year t – 3 to the end of year t. Variables that control for net income, dividends (including share repurchases), and shares sold are aggregated over the entire period (i.e., years t – 2, t – 1, and t ). Similarly, when using adjacent three-year period information inputs to adjust book value, we assume that managers compare: (1) the market value of equity at the end of year t with that at the end of t – 5, with (2) the aggregated sales revenue over years t and t – 2 with that over years t – 3 and t – 5. Based on these comparisons, firms adjust OCI from the end of year t – 5 to the end of year t. 4.4 KLD Data for Agency Costs H3 asserts that ethics would deter the degree of asymmetric OCI adjustments. Thus, we extend the coefficients on the terms, and , in Eq. (4) and Eq. (5), respectively, to include H3 as follows: . (4) and . (5) where KLD i,t is the total number of strengths minus the total number of concerns over six social/environmental dimensions: community activities, diversity, employee relations, environmental records, human rights, and product quality.