Korean Accounting Review (KAR) is the official journal of the Korean Accounting Association. The Korean Accounting Association (KAA) is the largest and oldest academic organization of accounting scholars and practitioners in Korea. It aims to create a fertile environment for innovation and collaborative research, to foster and improve research for the development and the promotion of accounting, and to develop a powerful network among scholars, practitioners, and authorities concerned with political decision making in this field.
Social and Financial Performance Management in Mission-Driven Firms
Jae Yong Shin , Jason Gwanhee Kim , Sun-moon Jung
DOI:10.24056/KAR.2025.12.001 KAR Vol.50(No.6) 1-38, 2025
Abstract
Using the data of mission-driven firms in Korea, this study empirically examines how managerial characteristics and performance incentives influence the reporting of social and financial performance. We find that managers’ mission orientation is positively associated with overreporting of social performance, driven by a perception of benevolence, while negatively correlated with financial performance management, primarily guided by honesty. Additionally, the main beneficiary of monetary incentives for social performance affects managers’ performance management behavior, with incentives directed towards the social mission increasing social performance overreporting but decreasing financial performance management. However, such a substitution effect disappears with incentives directed at individual employees―the incentives just reduces the likelihood of social performance. Our findings are robust to using an instrumental variable approach. Finally, we observe that while social performance management may enhance fundraising outcomes, it does not necessarily lead to improved social returns on investment, suggesting potential inefficiencies in resource allocation. Our study contributes to the literature on performance management by highlighting the psychological channels of honesty and benevolence in performance misreporting and offering empirical evidence of the substitution effect in multidimensional performance reporting.
Key Words
social enterprises, multi-dimensional performance, social performance, performance management, substitution effect, bonus incentives
DOI:10.24056/KAR.2025.12.002 KAR Vol.50(No.6) 39-64, 2025
Abstract
We investigate the effect of CEO tenure on foreign ownership in the Korean stock market. Using KOSPI-listed companies, the results show a significant negative relation between CEO tenure and foreign ownership. This suggests that foreign investors may perceive long-tenured CEOs as a sign of weakened internal controls and entrenchment, which r educes the attractiveness of such firms for investment. Additional analysis reveals that CEO tenure moderates the relationship between firm characteristics and foreign ownership. Specifically, a longer CEO tenure weakens the negative effect of information risk and strengthens the positive association between profitability and foreign ownership. However, CEO tenure does not significantly influence the relationship between foreign ownership and either earnings quality or audit quality. These findings imply that foreign investors evaluate CEO tenure in a nuanced manner, viewing it as both a potential risk and a strategic asset depending on the firm's internal conditions. The study provides important insights into how managerial characteristics affect foreign investor behavior, particularly in domestic markets with relatively weak governance structures. We provide the importance of transparent governance and internal controls, especially for firms led by long-serving CEOs.
Key Words
CEO tenure, foreign ownership, entrenchment, internal controls
Managerial Ability and Investment Growth by Internal Intangible Assets 경영자 능력과 내부창출무형자산에 기반한 투자 성장
권신형 Shinhyoung Kwon , 심해린 Haerin Shim
DOI:10.24056/KAR.2025.12.003 KAR Vol.50(No.6) 65-100, 2025
Abstract
This study examines the impact of managerial ability on firm growth supported by internally generated intangible assets. Managers use their discretion to choose whether they engage in internal investments to support firm growth or limit internal resources due to accounting rules requiring the expensing of internally generated intangible assets. We find that firms with more capable managers tend to have higher internal intangible-supported growth than those with less capable managers. We also find that this positive association is stronger when CEOs receive a higher proportion of short-term compensation relative to total compensation. Additional analysis reveals that managerial ability ultimately contributes to enhancing firm value by promoting growth supported by internally generated intangible assets. Further analysis finds that the positive relationship between managerial ability and intangible-supported growth remains significant regardless of the level of financial constraints and the moderating effect of short-term CEO compensation ratio becomes stronger under more severe financial constraints. Lastly, we find that a higher pay disparity between CEO and non-CEO executives discourages more able managers from engaging in internal investments. Overall, our results from cross-sectional and validation tests confirm the circumstances through which more able managers increase the development of intangible assets using internal resources.
Large Audit Firm Mergers and the Change of Audit Fees and Audit Hours 대형 회계법인의 합병과 감사시간 및 감사보수의 변화
최종학 Jong-hag Choi , 선우혜정 Catherine Heyjung Sonu
DOI:10.24056/KAR.2025.12.004 KAR Vol.50(No.6) 101-134, 2025
Abstract
In 2005, two large audit firms in Korea merged: Anjin and Hana accounting firms merged to form Anjin, and Younghwa and Angun audit firms merged to form Hanyoung. Using a difference-in-differences approach, this study examines whether these mergers affected audit fees and audit hours for the merged firms and other audit firms during the post-merger period, compared to the pre-merger period. Results suggest that audit fees and audit hours increased for all audit firms during the post-merger period. The merged audit firms experienced a greater increase in fees and hours compared to other audit firms. In summary, these findings suggest that the merged audit firms increased their audit hours due to the heightened legal responsibilities that accompanied their larger size and also increased their audit fees. These results are robust to additional analyses, including alternative model specifications, exclusion of certain years, and tests excluding firms that switched auditors during the sample period. Considering that Korean regulators have recently introduced various initiatives aimed at encouraging the consolidation of small and medium-sized audit firms to enhance their size, the findings of this study provide valuable insights into the effect of audit firm mergers.
Do Audit Committee Attributes Influence ESG Disclosure and Greenwashing? ESG 공시, 그린워싱에 대한 감사위원회의 역할
최종원 Jong Won Choi , 박주형 Ju Hyoung Park
DOI:10.24056/KAR.2025.12.005 KAR Vol.50(No.6) 135-179, 2025
Abstract
Prior research on the role and effects of audit committees has primarily focused on whether the establishment of audit committees can improve the quality of financial reporting disclosures, such as financial statements (Abbott et al. 2000; Bedard et al. 2004). However, as the scope of corporate disclosures has recently expanded from financial reporting to include non-financial information like ESG, the role of audit committees has also broadened. Therefore, this study examines how the establishment of audit committees and their characteristics, such as size, independence, activities, expertise, and the provision of audit committee-targeted education, affect ESG greenwashing. Using ESG disclosure scores from Bloomberg and ESG performance scores from the Korea Institute of Corporate Governance and Sustainability (KCGS), we sampled KOSPI companies for the period 2018-2020 to analyze the relationship between the establishment and characteristics of audit committees and greenwashing disclosures. The analysis found that in companies with audit committees, those with larger audit committees, higher independence, and greater activity, as well as those that provided targeted education for the audit committee, exhibited a significant reduction in greenwashing in ESG disclosures compared to those that did not. These results suggest that to effectively monitor ESG information disclosures, it is not only necessary to establish an audit committee but also to have a larger number of audit committee members, ensure the committee's independence, hold frequent meetings, and provide appropriate education targeted at the audit committee members. This allows for the early detection and control of issues in the ESG information disclosure process.
The Information Contents and Market Reactions in Virtual Assets: The Role of Voluntary Disclosures by Service Providers 가상자산 사업자의 자발적 공시에 대한 정보효과와 시장반응
정수련 Suryeon Jeong , 유승원 Seung Weon Yoo , 김선미 Seon Mi Kim
DOI:10.24056/KAR.2025.12.006 KAR Vol.50(No.6) 181-226, 2025
Abstract
This paper empirically analyzes market reactions and the informational contents of voluntary disclosures by virtual asset projects between 2020 and 2023. Investors show significantly positive reactions to favorable voluntary disclosures and negative reactions to unfavorable news. Voluntary disclosures related to institutional entry into finance, regulatory investigations or lawsuits, and new listings or delistings show significant relationships with CAR, whereas simple partnership agreements or inter-asset linkages show no significant association with CAR. In addition, voluntary disclosures significantly increase abnormal trading volume and return volatility, and unfavorable news contributes to virtual asset price crashes. Overall, this study provides empirical evidence that voluntary disclosures of favorable or unfavorable information by virtual asset projects lead to significant market reactions and informational effects. It also identifies the types of disclosures most likely to influence investor decision-making. These findings offer important implications for regulators in designing effective disclosure frameworks and contribute to strengthening investor protection and market stability.
Key Words
가상자산 자발적 공시, 정보 효과, 시장 반응, 가격붕괴, voluntary disclosure of virtual assets, information contents, market reactions, price crash risks of virtual assets
Understanding the Gender Pay Gap: Distinction between Difference and Discrimination 성별 급여 차이에 대한 이해: 차이와 차별의 구분
이문영 Moonyoung Lee
DOI:10.24056/KAR.2025.12.007 KAR Vol.50(No.6) 227-252, 2025
Abstract
The gender pay gap in South Korea is nearly 30 percent, one of the highest rates in the world. To understand the gender pay gap, I attempt to distinguish discrimination from differences between men and women, using a sample of 695 employees at Firm A from 2019 to 2022 (1,946 person-year observations). Because of the sizable gender pay disparity, Firm A has faced suspicion over gender discrimination in its personnel policies and corporate culture. Regression analysis indicates that pay is not statistically associated with gender after controlling for occupation, experience, position, and performance evaluation. The finding does not support the claim that salaries are paid differently by gender when men and women have comparable human-capital attributes. Additional analysis suggests that gender pay gap stems mainly from historical gender disparities in educational attainment, resulting in differences in occupations by gender. This study has limitations in that the findings cannot be generalized beyond a single-firm case. However, the study offers several implications. First, management can address gender pay gap issues by separating discrimination from differences. Second, a large gender pay gap does not necessarily imply discrimination. Third, gender pay gap needs to be examined in light of historical and social contexts as well as firm-level policies. A rigorous distinction between discrimination and difference may help mitigate unnecessary conflict between men and women and enhance labor productivity and firm value.
Key Words
성별 급여 차이, 남녀 임금 격차, 성차별, 양성평등, gender pay gap, wage difference between men and women, gender discrimination, gender equality
Fundamental Analysis and Stock Returns: Korean Evidence
Sewon Kwon , Su Jeong Lee
DOI:10.24056/KAR.2025.12.008 KAR Vol.50(No.6) 253-271, 2025
Abstract
This study examines whether Piotroski’s (2000) F-score, a composite measure of fundamental strength based on simple accounting signals, predicts future stock returns in the Korean equity market. Using a comprehensive sample of non-financial firms listed on the Korea Exchange from 2000 to 2022, we document several key findings. When stocks are sorted into quintile portfolios based on their F-scores each year, average abnormal returns increase monotonically across quintiles, with the return spread between the top and bottom quintiles yielding approximately 18%. Results from both cross-sectional and time-series tests show that the F-score remains a significant predictor of abnormal returns. The return difference between winners (F-score ≥ 5) and losers (F-score < 5) is positive in 20 out of 23 years. These findings indicate that the predictive power of the F-score cannot be fully explained by systematic risk. Component-level analysis shows that operating cash flow and equity issuance status are the main sources of the F-score’s predictive power. We also document that firms with high F-scores are more likely to experience subsequent improvements in profitability. Overall, our findings suggest that the F-score serves as a robust and economically meaningful indicator of both future stock returns and future earnings performance in the Korean market.
Key Words
fundamental analysis, F-score, composite measure, return predictability
