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|Other Titles:||Evaluating the Mandatory Disclosure Effect of Pro Forma EPS Deducted by Employee Bonus in Taiwan|
Fan, Hung-Shu;Chen, Ching-Lung
Employee bonus;Dilution effect;Incentive effect;Pro forma EPS deducted by employee bonus
|Issue Date:||2016-05-31 16:25:46 (UTC+8)|
Based on Taiwan’s regulation, the employee bonus is treated as an item of after-tax-earnings distribution rather than an expense of a firm. The Taiwan Securities and Futures Commission promulgated a new order on January 30, 2003 which required public companies to “disclose pro forma EPS deducted by employee bonus and director/supervisor compensation” rather than to “recognize employee bonus and director/supervisor compensation as a firm expense” in 2002 (and later) annual reports. Could such an expedient regulation make investors realize that the employee bonus is an expense that should be formally recognized in firm’s financial statements? This study is motivated to examine the mandatory disclosure effect of employee bonus as a firm expense after this new order is enforced. The empirical results indicate that the interactive variable of employee stock bonus and the dummy for the years of carrying out the new order is significantly negatively related to stock price. It evidences that the dilution effect of employee bonus (particularly stock bonus) becomes stronger than before. The results of the event study on 5-days around the employee bonus announcement date also indicate that investors reverse their stock valuation after the new order, and suggest that the dilution effect of employee stock bonus becomes stronger and even dominates its incentive effect. That is, the mandatory disclosure policy of pro forma EPS deducted by employee bonus and director/supervisor compensation achieves its objective.
International Journal of Accounting Studies
|Appears in Collections:||[會計評論] 期刊論文|
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