Hsieh, W. T., and Wu, T. Z. 2010. Determinants and Information Content of Using the Effect of Accounting Change from the Adoption of SFAS No. 34 (Financial Instruments) for Earnings Management. NTU Management Review, 21 (1): 205-238
Wan-Ting Hsieh, Assistant Professor, Department of Accounting, National Kaohsiung University of Applied Science
Tsing-Zai Wu, Professor, Department of Accounting, National Cheng Kung University
Abstract
Expecting possible immense impact of Taiwan's SFAS No. 34 Accounting for Financial Instruments, effective January 1, 2006, Taiwan's Securities and Futures Bureau requires that listed firms in stock exchanges disclose the cumulative effects of adopting this new statement in the Market Observation Posting System before January 31, 2006. Our empirical results show that determinants of the income effect from adopting SFAS No. 34 are the firm's reporting motivation, the corporate governance, the information disclosure and the industry membership. We find that stock market does not react significantly to the income effect of this accounting change. However, we do find the re-classified financial assets in fair values in the balance sheet for the first quarter of 2006 are relevant to stock price.
Keywords
financial instruments effect of accounting change earnings management