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Review of Quantitative Finance and Accounting

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03.08.2021 | Original Research

Evidence on using the estimation of level 3 fair values as an earnings management tool: evidence from Taiwan

verfasst von: Yan-Ting Lin

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 2/2022

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Abstract

This study aims to present direct evidence on whether the estimations of Level 3 fair values (L3FVs) are used as an earnings management tool. Researchers argue this possibility but there is a lack of direct evidence. Moreover, this study tests the moderating effect of managerial education level on using the estimation of L3FVs as an earnings management tool. The results show that the firms suspected of earnings management report relatively large abnormal valuation adjustments to L3FVs, suggesting that the estimations of L3FVs are used as an earnings management tool. Furthermore, the results indicate that the graduate education of accounting and financial managers in finance reduces the use of the estimation of L3FVs to manage earnings.

Vorheriger Artikel Equal-weighting and value-weighting: which one is better?

Nächster Artikel Does economic policy uncertainty matter for financial reporting quality? Evidence from the United States

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IFRS9 is not effective during the sample period.

The treatment samples are also compared with matching firms. Equation (2) is used to calculate the propensity score for each observation, and the observation that has the closest propensity score is used as a matching observation. The result shows that the coefficient on Suspect is positively significant at the 5% level. The coefficient on Suspect*FNMS is negatively significant at the 10% level. The results of propensity matching tests still support the predictions of H1 and H2.

I am grateful to the referee for this insightful suggestion.

https://www.topuniversities.com/university-rankings/world-university-rankings/2018

The accounting and financial managers of two observations hold two international degrees.

Alternatively, I divide Dom_FNMS and Fn_FNMS into two regressions and use SUR (seemingly unrelated regression) estimation to confirm the robustness. The results of SUR estimations are similar to the results of combining the two indicator variables into a single regression.

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Titel: Evidence on using the estimation of level 3 fair values as an earnings management tool: evidence from Taiwan
verfasst von: Yan-Ting Lin
Publikationsdatum: 03.08.2021
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 2/2022
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-021-01009-9

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