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RAAS 2025/06
Vol.15 No.1:
87-118
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The Disclosure of Non-Executive Compensation, Salary Adjustments and Earnings Imformativeness
Shu-Ling Yeh1, Min-Jeng Shiue1*, and Ting-Ru Huang2
1Department of Accountancy, National Taipei University
2PricewaterhouseCoopers Taiwan
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Abstract:
The Financial Supervisory Commission of Taiwan mandates that listed and OTC companies disclose compensation information for non-executive full-time employees on the Market Observation Post System starting from 2019. This study aims to examine under this disclosure policy, whether capital market investors are influenced by factors such as a company's disregard for employee rights, the compensation adjustment policies of warned companies, and the transitions from warned to non-warned companies, ultimately affecting the informativeness of the company's earnings. The study analyzed the data from listed and OTC companies from 2019 to 2020 in Taiwan. The empirical findings suggest that there is no significant evidence of lower earnings informativeness in the subsequent year for companies previously listed as warned. However, it is observed that higher earnings informativeness for warned companies whose salary adjustments exceed the industry average. When further classifying warned companies into three categories, companies in the second category (those with better EPS performance than peers but lower average non-executive salaries) show increased earnings informativeness. Finally, transitioning from a warned to a non-warned status does not affect earnings informativeness, but moving from a non-warned to a warned status results in significantly lower informativeness, indicating a negative market reaction. The findings of this study not only enrich the research related to non-executive employee compensation but also elucidate the impacts on the capital market and internal corporate management. Additionally, the results carry policy implications, providing guidance for regulatory authorities in refining disclosure policies regarding non-executive employee compensation.
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Keywords: Non-executive employee compensation; Salary adjustment; Informativeness of accounting earnings
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Corresponding author
; e-mail: smj@gm.ntpu.edu.tw
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©
2025
Review of Accounting and Auditing Studies, ISSN 2221-9374
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