DISCRETIONARY PENSION ASSUMPTION CHOICES, CORPORATE GOVERNANCE, AND EARNINGS MANAGEMENT: EVIDENCE FROM TAIWAN

James Juichia Lin ； Edward M. Werner

《Advances in Quantitative Analysis of Finance and Accounting》 18期 (2021/12) Pp. 135-165

https://doi.org/10.6293/AQAFA.202112_(18).0005

摘要

This study examines how corporate governance affects earnings management through discretionary pension assumption choices. We provide empirical evidence in the Taiwanese setting showing that pension assumption choices are significantly associated with weaker corporate governance. Our findings indicate that the opacity inherent in pension accounting guidance in this setting is exacerbated for firms with poor corporate governance. Specifically, results show that the deviation between control rights and cash flow rights, the number of board seats held by the ultimate controller, and chief executive officer (CEO) duality are significantly associated with more aggressive salary growth rate and/or rate of return on pension assets assumption choices. In addition, our results suggest that board independence and institutional shareholders play important monitoring roles, which can mitigate opportunistic discretionary pension assumption choices.

關鍵字

Corporate Governance ； Earnings Management ； Pension Accounting

參考文獻

Yeh, Y.-H., Ko, C.-E., & Su, Y.-H. (2003). Ultimate control and expropriation of minority shareholders: New evidence from Taiwan. Academia Economic Papers, 31, 263-299. doi:10.29628/AEP.200309.0002.

Asthana, S. (1999). Determinants of funding strategies and actuarial choices for defined-benefit pension plans. Contemporary Accounting Research, 16, 39-74. doi:10.1111/j.1911-3846.1999.tb00574.x.

Bartov, E., Mohanram, P., & Nissim, D. (2007). Managerial discretion and the economic determinants of the disclosed volatility parameter for valuing ESOs. Review of Accounting Studies, 12, 155-179. doi:10.1007/s11142-006-9024-x.

Bergstresser, D. B., Mihir, M. A., & Rauh, J. (2006). Earnings manipulation, pension assumptions, and managerial investment decisions. The Quarterly Journal of Economics, 121, 157-195. doi:10.1093/qje/121.1.157.

Brickley, J. A., Coles, J. L., & Terry, R. L. (1994). Outside directors and the adoption of poison pills. Journal of Financial Economics, 35, 371-390. doi:10.1016/0304-405X(94)90038-8.