The Association between Asset Impairments And Operating Performance and Cash Dividend
Date Issued
2007
Date
2007
Author(s)
Tsai, Wan-Jung
DOI
zh-TW
Abstract
To promote the quality of accounting information, The Financial Accounting Standard Board in Taiwan issued the Statement of Financial Accounting Standard No.35 “Accounting for Asset Impairment” in July 2004. It regulates the assets entered the account with historical cost before should be pursued the impairment test to re-evaluate the account if there is any sign of the reduced value of assets. Because the domestic appraisal system is not mature and the professional appraiser is insufficient, managers may use their discretion to make asset impairment decision even after the SFAS No.35 was issued. The purpose of this paper therefore is to examine whether managers may make use of the recognition of asset impairment to perform earning management and pay high cash dividends to stockholders to mitigate the impact of their declining financial health or convey the prediction of the future operation of the company.
The findings indicate that the companies recognize assets impairment when their operating performance is much worse than before. Hence, the managers indeed have suspicion of exercising their discretion over impairment loss. However, the empirical evidence shows that there is a negative relation between the impairment loss and operating income or income before tax, so there is no evidence that operating performance reverse in post-impairment years to accomplish the purpose of big bath. It implies that the discretion is an appropriate response to changing economic circumstances as opposed to acting opportunistically. Besides, the regression results show that there in no remarkable relation between the impairment loss and cash dividends. Perhaps the impairment loss is not the determination factor of dividend policy as it only has a little effect on the operating performance.
Subjects
資產減損
洗大澡
營運績效
資產報酬率
每股盈餘
現金股利
asset impairment
big bath
operating performance
cash dividend
earning per share
Type
other
File(s)![Thumbnail Image]()
Loading...
Name
ntu-96-R93722051-1.pdf
Size
23.31 KB
Format
Adobe PDF
Checksum
(MD5):f3665d6dd592bfb813be5adb90c1082a