Earnings Management and Investor's Stock Return

This study investigates the effect of window dressing by Taiwanese firms on investors' stock returns. The second digit of the earnings reported as earnings before interest and tax, earnings after interest and tax, or earnings per share is found to occasionally serve as the reference point. In addition, the manipulation of earnings management shows a negative relationship between earnings management and investor stock returns. Such findings have important implications for investing decisions made by Taiwanese stockholders, who traditionally have concerns about the quality of a firm's financial statements.