Evaluating Earnings Management in Taiwan’s Nonprofit Hospitals Using Cross-Sectional Abnormal Items Models

Abstract

The purpose of this paper is to examine whether earnings management in the non profit hospitals of Taiwan and analyze the earnings management behavior. We developed and tested the standard-Jones, modified-Jones, BD (abnormal bad debt), WCA (abnormal working capital), NORR (abnormal non-operating or non-revenue generating activity expenditure), and NGSP-models (abnormal net gain on the sale of property) to estimate the amount of abnormal accrual items or abnormal real items. Empirical evidence suggested that the BD, NORR and NGSP models may be used to determine levels of earnings management. Thus, these models are ideal for determining how Taiwan’s nonprofit hospitals manage their earnings.