4.外文翻译财务111柯聪

本科毕业论文（设计）外文翻译题目上市银行盈利质量分析与评价学院商学院专业财务管理班级财务 111学号 201152425141学生姓名柯聪指导教师穆敏丽费美玲完成日期 2015年01月16日一、外文原文原文一：Measuring the quality of earnings1. IntroductionGenerally accepted accounting principles (GAAP) offer some flexibility in preparing the financial statements and give the financial managers some freedom to select among accounting policies and alternatives. Earning management uses the flexibility in financial reporting to alter the financial results of the firm (Ortega and Grant, 2003).In other words, earnings management is manipulating the earning to achieve a predetermined target set by the management. It is a purposeful intervention in the external reporting process with the intent of obtaining some private gain (Schipper, 1989).Levit (1998) defines earning management as a gray area where the accounting is being perverted; where managers are cutting corners; and, where earnings reports reflect the desires of management rather than the underlying financial performance of the company.The popular press lists several instances of companies engaging in earnings management. Sensormatic Electronics, which stamped shipping dates and times on sold merchandise, stopped its clocks on the last day of a quarter until customer shipments reached its sales goal. Certain business units of Cendant Corporation inflated revenues nearly $500 million just prior to a merger; subsequently, Cendant restated revenues and agreed with the SEC to change revenue recognition practices. AOL restated earnings for $385 million in improperly deferred marketing expenses. In 1994, the Wall Street Journal detailed the many ways in which General Electric smoothed earnings, including the careful timing of capital gains and the use of restructuring charges and reserves, in response to the article, General Electric reportedly received calls from other corporations questioning why such common practices were “front-page” news.Earning management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers (Healy and Whalen, 1999).Magrath and Weld (2002) indicate that abusive earnings management and fraudulent practices begins by engaging in earnings management schemes designed primarily to “smooth” earnings to meet internally or exte rnally imposed earnings forecasts and analysts’ expectations.Even if earnings management does not explicitly violate accounting rules, it is an ethically questionable practice. An organization that manages its earnings sends a message to its employees that bending the truth is an acceptable practice. Executives who partake of this practice risk creating an ethical climate in which other questionable activities may occur. A manager who asks the sales staff to help sales one day forfeits the moral authority to criticize questionable sales tactics another day.Earnings management can also become a very slippery slope, which relatively minor accounting gimmicks becoming more and more aggressive until they create material misstatements in the financial statements (Clikeman, 2003)The Securities and Exchange Commission (SEC) issued three staff accounting bulletins (SAB) to provide guidance on some accounting issues in order to prevent the inappropriate earnings management activities by public companies: SAB No. 99 “Materiality”, SAB No. 100 “Restructuring and Impairment Charges” and SAB No. 101 “Revenue Recognition”.Earnings management behavior may affect the quality of accounting earnings, which is defined by Schipper and Vincent (2003) as the extent to which the reported earnings faithfully represent Hichsian economic income, which is the amount that can be consumed (i.e. paid out as dividends) during a period, while leaving the firm equally well off at the beginning and the end of the period.Assessment of earning quality requires sometimes the separations of earnings into cash from operation and accruals, the more the earnings is closed to cash fromoperation, the higher earnings quality. As Penman (2001) states that the purpose of accounting quality analysis is to distinguish between the “hard” numbers resulting from cash flows and the “soft” numbers resulting from accrual accounting.The quality of earnings can be assessed by focusing on the earning persistence; high quality earnings are more persistent and useful in the process of decision making.Beneish and Vargus (2002) investigate whether insider trading is informative about earnings quality using earning persistence as a measure for the quality of earnings, they find that income-increasing accruals are significantly more persistent for firms with abnormal insider buying and significantly less persistent for firms with abnormal insider selling, relative to firms which there is no abnormal insider trading.Balsam et al. (2003) uses the level of discretionary accruals as a direct measure for earning quality. The discretionary accruals model is based on a regression relationship between the change in total accruals as dependent variable and change in sales and change in the level of property, plant and equipment, change in cash flow from operations and change in firm size (total assets) as independent variables. If the regression coefficients in this model are significant that means that there is earning management in that firm and the earnings quality is low.This research presents an empirical study on using three different approaches of measuring the quality of earnings on different industry. The notion is; if there is a complete consistency among the three measures, a general assessment for the quality of earnings (high or low) can be reached and, if not, the quality of earnings is questionable and needs different other approaches for measurement and more investigations and analysis.The rest of the paper is divided into following sections: Earnings management incentives, Earnings management techniques, Model development, Sample and statistical results, and Conclusion.2. Earnings management incentives2.1 Meeting analysts’ expectationsIn general, analysts’ expectations and company predictions tend to address t wo high-profile components of financial performance: revenue and earnings fromoperations.The pressure to meet revenue expectations is particularly intense and may be the primary catalyst in leading managers to engage in earning management practices that result in questionable or fraudulent revenue recognition practices. Magrath and Weld (2002) indicate that improper revenue recognition practices were the cause of one-third of all voluntary or forced restatements of income filed with the SEC from 1977 to 2000.Ironically, it is often the companies themselves that create this pressure to meet the market’s earnings expectations. It is common practice for companies to provide earnings estimates to analysts and investors. Management is often faced with the task of ensuring their targeted estimates are met.Several companies, including Coca-Cola Co., Intel Corp., and Gillette Co., have taken a contrary stance and no longer provide quarterly and annual earnings estimates to analysts. In doing so, these companies claim they have shifted their focus from meeting short-term earnings estimates to achieving their long-term strategies (Mckay and Brown, 2002).2.2 To avoid debt-covenant violations and minimize political costsSome firms have the incentive to avoid violating earnings-based debt covenants. If violated, the lender may be able to raise the interest rate on the debt or demand immediate repayment. Consequently, some firms may use earnings-management techniques to increase earnings to avoid such covenant violations. On the other hand, some other firms have the incentive to lower earnings in order to minimize political costs associated with being seen as too profitable. For example, if gasoline prices have been increasing significantly and oil companies are achieving record profit level, then there may be incentive for the government to intervene and enact an excess-profit tax or attempt to introduce price controls.2.3 To smooth earnings toward a long-term sustainable trendFor many years it has been believed that a firm should attempt to reduce the volatility in its earnings stream in order to maximize share price. Because a highly violate earning pattern indicates risk, therefore the stock will lose value compared toothers with more stable earnings patterns. Consequently, firms have incentives to manage earnings to help achieve a smooth and growing earnings stream (Ortega and Grant, 2003).2.4 Meeting the bonus plan requirementsHealy (1985) provides the evidence that earnings are managed in the direction that is consistent with maximizing executives’ earnings-based bonus. When earnings will be below the minimum level required to earn a bonus, then earning are managed upward so that the minimum is achieved and a bonus is earned. Conversely, when earning will be above the maximum level at which no additional bonus is paid, then earnings are managed downward. The extra earnings that will not generate extra bonus this current period are saved to be used to earn a bonus in a future period. When earnings are between the minimum and the maximum levels, then earnings are managed upward in order to increase the bonus earned in the current period.2.5 Changing managementEarnings management usually occurs around the time of changing management, the CEO of a company with poor performance indicators will try to increase the reported earnings in order to prevent or postpone being fired. On the other hand, the new CEO will try shift part of the income to future years around the time when his/her performance will be evaluated and measured, and blame the low earning at the beginning of his contract on the acts of the previous CEO.3. Earnings management techniquesOne of the most common earnings management tools is reporting revenue before the seller has performed under the terms of a sales contract (SEC,SAB No. 101,1999).Another area of concern is where a company fails to comply with GAAP and inappropriately records restructuring charges and general reserves for future losses, reversing or relieving reserves in inappropriate periods, and recognizing or not recognizing an asset impairment charge in the appropriate period (SEC, SAB No. 100, 1999).Managers can influence reported expenses through assumptions and estimates such as the assumed rate of return on pension plan asset and the estimated useful livesof fixed assets, also they can influence reported earnings by controlling the timing of purchasing, deliveries, discretionary expenditures, and sale of assets.3.1 Big bath“Big Bath” charges are one-time restructuring charge. Current earnings will be decreased by overstating these one-time charges. By reversing the excessive reserve, future earnings will increase.Big bath charges are not always related to restructuring. In April 2001, Cisco Systems Inc. announced charges against earnings of almost $4 billion. The bulk of the charge, $2.5 billion, consisted of an inventory write down. Writing off more than a billion dollars from inventory now means more than a billion dollars of less cost in the future period. This an example of what ultra-conservative accounting in one period makes possible in future periods.3.2 Abuse of materialityAnother area that might be used by accountants to manipulate the earning is the application of materiality principle in preparing the financial statements, this principle is very wide, flexible and has no specific range to determine where the item is material or not. SEC uses the interpretation ruled by the supreme court in identifying what is material; the supreme court has held that a fact is material if there is a substantial likelihood that the fact would have been viewed by reasonable investor as having significantly altered the “total mix” of information made available (SEC, SAB No. 99, 1999).The SEC has also introduced some considerations for a quantitatively small misstatement of a financial statement item to be material:. whether the misstatement arises from an item capable of precise measurement or whether it arises from an estimate and, if so, the degree of imprecision inherent in the estimate;. whether the misstatement masks a change in earnings or other trends;.whether the misstatement hides a failure to meet analysts’ consensus expectations for the enterprise;. whether the misstatement changes a loss into income or vice versa;. whether the misstatement concerns a segment or other portion of the registrant’s business that has been identified as playing a significant role in the registrant’s operations or profitability; and. whether the misstatement involves concealment of an unlawful transaction.3.3 Cookie jar“Cookie jar” reserve –sometimes labeled rainy day reserve or contingency reserves, in periods of strong financial performance, cookie jar reserve enable to reduce earnings by overstating reserves, overstating expenses, and using one-time write-offs. In periods of weak financial performance, cookie jar reserves can be used to increase earnings by reversing accruals and reserves to reduce current period expenses (Kokoszka, 2003).The most famous example of use of cookie jar reserves is WorldCom Inc. In August 2002, an internal review revealed that the company had $2.5 billion reserves related to litigation, uncollectible and taxes. The company used most of them in a series of so-called reserve reversals in order to have higher earnings.Source: Khaled ElMoatasem Abdelghany,2005. “Measuring the quality of earnings”, Managerial Auditing Journal, vol.20, no.9, pp.1001 – 1015.原文二：Dividend payment and earnings quality: evidence from Indonesia1. IntroductionPrevious studies have examined whether a dividend is a tool chosen by firms to provide information to the market (e.g. signaling) (Bhattacharya, 1979; Miller and Modigliani,1961). Traditional dividend-signaling models predict that a dividend reveals information regarding future earnings (Pettit, 1972; Aharony and Swary, 1980; Asquith and Mullins, 1983; Aharony and Dotan, 1994). The increase (decrease) in dividend provides a good (bad) signal about a firm’s future earnings (Bhattacharya, 1979; John and Williams, 1985; Miller and Rock, 1985; Arnott and Asness, 2003; Lukose and Rao, 2004). However, there are other studies that find contradictory results that indicate a dividend has weak information content regarding a firm’s future earnings (DeAngelo et al., 2006; Benartzi et al., 1997; Brav et al., 2005).The previous studies examined only the association between dividends and earnings. In addition to these studies, several other studies conducted in developed markets showed that there is an association between dividend and earnings quality (Caskey and Hanlon, 2005; Hanlon et al., 2007; Chen et al., 2007; Tong and Miao, 2011;Skinner and Soltes, 2011).Indonesia is an emerging economy whose capital market has undergone significant regulatory reforms and has an institutional environment that differs from other countries; such differences have implications for dividend policy and earnings quality. A considerable amount of literature has examined dividend policies (Jensen and Meckling, 1976; Rozeff, 1982; Easterbrook, 1984; Jensen et al., 1992), most of which has tended to focus on developed markets, especially the USA. Relatively few empirical studies have addressed the dividend policy in emerging capital markets. Our study contributes to the extant literature by focusing on Indonesia, one of the emerging markets. Glen et al. (1995) and Adaoglu (2000) suggest that there are significant differences in dividend policy behavior between developed markets and emerging markets. This may be due to differences in the level of efficiency andinstitutional arrangements between both markets. It is therefore useful to improve our understanding of dividend policy and earnings quality issues from an emerging market perspective.Following this stream of research, our study examines whether a dividend is an indicator of higher earnings quality in Indonesia, one of the emerging markets. We analyze several features of dividends (dividend-paying status, dividend size, dividend size changes, and dividend persistence) and examine the relationship between these features and earnings quality.Tong and Miao (2011) also examine the relationship between dividend and earnings quality. They use only three features of dividends (dividend-paying status, dividend size, and dividend persistence). In addition, our study also examines dividend size changes as an additional feature, as in Caskey and Hanlon (2005). Tong and Miao (2011) use accounting-based and market based measures of earnings quality. We focus only on accounting-based measures. Because Indonesian capital market is still emerging, market-based measures may not be the best measures of earnings quality.2. Previous studies and hypotheses developmentPettit (1972) finds evidence that the market reacts to dividend announcements. This evidence supports the signaling theory. Savov and Weber (2006) also finds a negative relationship between a decrease in dividend and future stock returns, whereas he finds a positive relationship for firms that do not decrease their dividend level.Current studies go further by examining whether dividends provide information about earnings quality. Hanlon et al. (2007) show that investors can better predict future earnings if firms distribute dividends (i.e. dividend has predictive value). Tong and Miao (2011) also examine the relationship between dividend payment and earnings quality. Firms that distribute dividends have higher earnings quality than firms that do not distribute dividends. A larger size of dividend and dividend persistence also indicates higher earnings quality. Using samples of firms that the SEC accused of committing financial reporting fraud, Caskey and Hanlon (2005) find that fraudulent firms did not pay a dividend and had a smaller increase of dividendsthan other firms.Chen et al. (2007) use the accruals quality (AQ) based on the Dechow and Dichev (2002) model as a proxy of information risk. They conclude that firms that distribute dividends and increase dividend size have lower information risk (more accurate earnings information), smaller analyst forecast dispersion, and lower future stock returns volatility. Investors treat risk-related information (the accuracy of information in the financial statements) as a priced risk factor. This finding indicates that dividend distribution is an indicator of earnings quality. Skinner and Soltes (2011) also find a similar result. Firms that distribute dividends have higher earnings persistence than firms that do not distribute dividends. Miller and Rock (1985) provide an explanation for these findings, arguing that the dividend improves the credibility of reported earnings because it is too costly for managers to distribute cash dividends on a regular basis without the support of underlying cash flows.Based on the above findings, we expect that dividends could provide signal for earnings quality. Firms that distribute dividends are expected to have higher earnings quality than other firms. There are two arguments to support this notion. First, based on agency theory, a dividend is considered to have a role in minimizing agency conflicts between managers and shareholders. Easterbrook (1984) suggests that dividends play a role in minimizing agency costs by helping the capital market monitor managerial actions and performance, making it difficult for managers to manipulate earnings. Myers (2000) implies that investors have a right to a firm’s assets, but it is difficult to prevent insiders (management) to misuse cash flows. Therefore, management is expected to distribute dividends regularly in sufficient amounts for the investors. Dividends are seen as a means of communication from managers to shareholders to demonstrate the firm’s performance.The second argument is that it is difficult (too expensive) for managers to distribute cash dividends based on profits that do not reflect the firm’s performance because they need actual cash flow for the distribution of dividends. Breeden (2003) also suggests that the dividend is one of the methods to measure the fairness of reported earnings. Easterbrook (1984) states that firms who manipulate earnings tendto distribute or increase dividends less often than firms that do not engage in earnings manipulation. Profits from earnings manipulation do not have cash inflow implications and also are not sustainable in the future. Glassman (2005) suggests that firms that pay dividends tend to not manipulate earnings because manipulated earnings do not generate the cash inflows needed to pay dividends. Therefore, managers who manipulate earnings have a tendency to neither distribute nor increase their dividend despite an earnings increase because such an increase is not permanent (Lintner, 1956). Malkiel (2003) also argues that dividends will provide a strong signal to investors about the financial strength and credibility of reported earnings. Skinner and Soltes (2011) find that the reported earnings of dividend-paying firms are more persistent (i.e. higher earnings quality) than those of other firms. They also find that these dividend payers are less likely to report losses and that those losses that they do report tend to be transitory losses driven by special items. Thus, we developed the H1 as follows:H1. Dividend-paying firms have higher earnings quality than other firms.A dividend has several features, which we expect to have an association with earnings quality. One of these features is the size of dividend payments. Skinner and Soltes (2011) examine the association of dividends and earnings quality (using the persistence of earnings). They conclude that earnings of dividend-paying firms are more persistent (higher earnings quality) and that the effect is more pronounced for firms with larger dividend payouts. Tong and Miao (2011) also find that large dividend-paying firms have higher earnings quality than firms that distribute small dividends or no dividend payment. They argue that firms paying out large cash dividends are certainly supported by cash, which is less likely to come from manipulated profits that do not have a strong cash basis:H2. Large dividend-paying firms have higher earnings quality than other firms.Firms may change their dividend payout ratio. We predict that firms pay lower dividends due to the lower persistence of earnings (Skinner and Soltes, 2011) and because manipulated earnings have no association with cash flows. Adaoglu (2000) argues that when there is a change in the earnings potential of the firms, firms tend tochange their dividend policies. If they think that there is a good future earnings potential and they can sustain the increase in dividends, they will increase the dividend level.Firms that increase the size of their dividend payments are considered to have higher earnings quality, as these firms have to assure investors that this rise in the level of dividends can be maintained and they must be supported by a strong cash basis (Caskey and Hanlon, 2005). Lintner (1956) concludes that a manager would not raise a firms’ dividend to a level that cannot be maintained because it will give a bad signal if the firm reduces the dividend size or stops distributing them:H3. Firms that increase the size of their dividend payments have higher earnings quality than other firms.A dividend that is distributed regularly is called a persistent dividend. Firms paying dividends on a regular basis should have enough cash, which is supported by firms’good operational performance (Tong and Miao, 2011). This finding is consistent with Caskey and Hanlon (2005) who suggest that earnings derived from manipulation do not produce cash (no cash basis) and are not sustainable. Hence, only firms with high earnings quality (firms that believe they have good earnings potential in the future and also believe that future earnings can be sustain) will be willing and able to pay dividend regularly:H4. Persistent dividend-paying firms have higher earnings quality than other firms.3. Research methodTo test the above hypotheses we used the following research model:EQ i;t=α0+α1DIV i;t+α2SIZE i;t+α3BTM i;t+α4SGROWTH i;t+α5LOSS i;t+α6AGE i;t +α7LEV i;t +α8H_INDEX i;t +α9CFO_STD i;t + εi;tEQ i;t=β0+β1LARGE_DIV i;t+β2SMALL_DIV i;t+β3SIZE i;t+β4BTM i;t +β5SGROWTH i;t+β6LOSS i;t+β7AGE i;t+β8LEV i;t+β9H_INDEX i;t+β10H_INDEX i;t +εi;t EQ i;t=δ0+δ1DIV_CHANGE i;t+δ2SIZE i;t+δ3BTM i;t+δ4SGROWTH i;t+δ5LOSS i;t +δ6AGE i;t +δ7LEV i;t +δ8H_INDEX i;t+δ9CFO_STD i;t +εi;tEQ i;t=γ0+γ1PDIV i;t+γ2SIZE i;t +γ3BTM i;t+γ4SGROWTH i;t+γ5LOSS i;t+γ6AGE i;t+γ7LEV i;t +γ8H_INDEX i;t +γ9CFO_STD i;t +εi;tExpected sign: α1＜0, β1＜β2, δ1＜0, γ1＜0where:EQ= earnings quality, measured using absolute value of discretionary accruals (ADA), absolute value of accruals quality (AAQ), and AQ.DIV = dividend-paying status, 1 if firms paid dividend and 0 if otherwise.LARGE_DIV= large dividend payment, 1 if firms distribute large cash dividend and 0 if otherwise.SMALL_DIV = small dividend payment, 1 if firms dividend is not classified as large dividends and 0 if otherwise.DIV_CHANGE = dividend changes, 1 if firms increase dividend payout ratio and 0 if otherwise.PDIV = dividend persistence, 1 if firms persistently paid dividend for five years and 0 if otherwise.SIZE = firm size.BTM = book-to-market.SGROWTH = sales growth.LOSS =financial performance, 1 if firms’ earnings before extraordinary items is negative and 0 otherwise.AGE = firm’s age.LEV= leverage.H_INDEX = Herfindahl-Hirshman Index.CFO_STD = standard deviation of cash flows from operating activities.We use three measures of earnings quality: ADA, AAQ, and AQ. All measures of earnings quality used in this study are accrual-based measures. Earnings consist of two components: accruals and cash flows. Accruals are subject to managerial discretion because they are the product of judgments, estimates, and allocations (Subramanyam, 1996; Francis et al., 2005). Accruals also have lower persistence than cash flows, primarily due to the errors, subjectivity, and opportunism involved in the accrual process (Sloan, 1996; Xie, 2001; Dechow and Dichev, 2002; Hao, 2009).The first measure of earnings quality is ADA based on the Kothari et al. (2005) model. Kothari et al. (2005) has been used extensively in prior studies, such as Tong and Miao (2011), Chen et al. (2011) and Cheng et al. (2013):TACC i;t =β0 +β1（ΔSALES i,t-ΔAR i;t）+β2PPE i;t +β3ROA i;t-1 +εi;t Where:TACC –total accruals, ΔSALES –changes in sales, ΔAR –changes in accounts receivable, PPE – gross property, plant, and equipment (PPE), ROA – return on assets. All variables are deflated by beginning-of-year total assets.To measure AAQ, we use the Dechow and Dichev (2002) model as modified by McNichols (2002). Extant studies also use this model to measure earnings quality (Li and Wang, 2010; Tong and Miao, 2011; Chen et al., 2011). Larger residuals from the Kothari et al. (2005) model as well as the Dechow and Dichev (2002) model as modified by McNichols (2002) indicate poorer earnings quality:Source: Febriela Sirait and Sylvia Veronica Siregar, 2014. “Dividend payment and earnings quality: evidence from Indonesia”,International Journal of Accounting, vol.22, no.2, pp.103-117.。