Tsai, Y. T., and Li, X. R. 2025. The Financial Statement Comparability of Listed Foreign Firms in Taiwan: The Effect of Board Interlocks and Financial Statement Fraud. NTU Management Review, 35 (1): 1-54. https://doi.org/10.6226/NTUMR.202504_35(1).0001
Yuan-Tang Tsai, Department of Accountancy, National Taipei University
Xing-Rong Li, Department of Accounting, National Taiwan University
Abstract
The paper examines the changes in the financial statements comparability (comparability) of listed foreign firms in Taiwan (i.e. KY companies; KY) and non-KY companies (NKY) surrounded by the case of Pharmally scandal in 2020. We find that, as a whole, the comparability of KY is worse than NKY, and the comparability of NKY with board interlocks to KY is also worse than NKY without board interlocks. More elaborately, after the case of Pharmally scandal, the comparability of NKY has improved, regardless of whether they are with board interlocks or not; however, the comparability of KY has not improved and has even deteriorated compared to that of NKY. The possible reason is that due to COVID-19, the auditors cannot conduct on-site audits of KY whose operating locations are overseas, which has resulted in the inability to improve their comparability in the short term and may even worsen it by not being able to conduct on-site audits. This finding shows that under COVID-19, the company's operating location helps explain the comparability of the financial statements.
Keywords
financial statement comparabilitylisted foreign firms in Taiwan (KY)board interlocksCOVID-19the case of Pharmally