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Can diversified information disclosures mitigate earnings management activities in Taiwanese SMEs

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  • Huang, Chien-Ming
  • Chen, Wei-Ting

Abstract

Using accrual and real activity manipulation strategies, this paper examines whether there is the relationship between earnings management and corporate diversification in Taiwanese OTC companies. The evidence suggests that geographic diversification is linked to higher levels of downward real activity manipulation. In contrast, product diversification exhibits a negative relationship between earnings manipulation and firm performance. We find that geographically diversified firms are more likely to engage in earnings management activities due to the increased potential for firm's complexity. Moreover, empirical results from difference-in-differences regression model suggest that a greater proportion of insider shareholding is associated with lower levels of earnings manipulation after 2018 corporate governance reforms. Therefore, engaging in diversified information disclosure does not help reduce the sensitivity of earnings management to performance for Taiwanese SMEs, providing valuable insights for policymakers and investors in the capital markets.

Suggested Citation

  • Huang, Chien-Ming & Chen, Wei-Ting, 2025. "Can diversified information disclosures mitigate earnings management activities in Taiwanese SMEs," Pacific-Basin Finance Journal, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:pacfin:v:94:y:2025:i:c:s0927538x25002513
    DOI: 10.1016/j.pacfin.2025.102914
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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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