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

Asymmetric Valuation Adjustments in Accumulated Other Comprehensive Income 150 Our use of KLD i,t to proxy for agency costs is consistent with Jones (1995) and Atkins (2006). We also use CEO duality for agency costs in robustness tests. Jones (1995) develops a theoretical framework, in which firms have a strong incentive to demonstrate a commitment to ethical behavior if they conduct their business on the basis of trust and cooperation. Atkins (2006) suggests that what stakeholders actually mean by “social responsibility” is to be transparent in firms’ financial reporting. We substitute Eq. (4) and Eq. (5) into Eq. (3) to obtain the following regression model (i.e., Eq. (6)) for testing H3: , (6) The above Eq. (6) can be restated as follows: (7) If OCI adjustments are asymmetric, γ M , which is equivalent to β M in Eq. (3), is negative. Similarly, a negative γ S , which is equivalent to β S in Eq. (3), suggests a smaller amount for book value to shrink when sales revenue decreases. In contrast, book value grows by a larger amount when sales revenue increases by an equivalent size. H3 predicts that the coefficients for γ M and γ S are positive, if ethics, as measured by KLD i,t , alleviate the problem of asymmetric OCI adjustments.