Abstract

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.