African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4164

Full Length Research Paper

Can earnings’ management be a tool to affect the accuracy of earnings’ forecasts? Evidence from Taiwan

Shu-Chin Liu1, Ai-Chi Hsu2 and Chun-An Li2
1Department of International Trade and Logistics, Overseas Chinese University, 100 Chiao Kwang Road, Xitun District, Taichung 407, Taiwan. 2Department of Finance, Yunlin University of Science and Technology.
Email: [email protected]

  •  Accepted: 28 June 2011
  •  Published: 30 September 2011


This study sets out to investigate the determinants of the accuracy of focusing primarily on earnings management whilst also effectively controlling the two major bias problems – sample-selection bias and self-selection bias – through the econometric model developed specifically for this study. Our results indicate that managers tend to engage in earnings management as a means of improving the apparent accuracy of their forecasting, especially for optimistic forecasters. Furthermore, our analysis, which uses listed firms in Taiwan as the study sample, provides us with a valuable opportunity to observe management disclosure quality from a perspective which differs significantly from that of the prior studies, within which the focus is invariably placed on the more developed markets.


Key words: Earnings management; Sample selection bias; Self-selection bias.