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.
Perceived Factors of Industry Pay Gap: The Impact of Perceived Controllability on Firm Performance 산업 내 임금격차에 대한 인식 요인: 통제 가능성이 기업성과에 미치는 영향
안하은 Ha Eun Ahn , 유승원 Seung Weon Yoo
DOI:10.24056/KAR.2026.02.001 KAR Vol.51(No.1) 1-34, 2026
Abstract
This study examines the effect of the pay gap between managers in the same industry on firm performance to find out what factors cause the conflicting effects of the pay gap.
Using U.S. companies from 2000 to 2022, the research finds that if the ratio of the pay gap between managers that inexplicable proportion of the pay gap is high, the pay gap has a significant negative (-) effect on corporate performance. This effect does not appear if the inexplicable proportion of the pay gap between managers was low.
Next, this study analyzes the effect of the pay gap in the industry when the company is growing, which is expected to narrow the pay gap in the future. If the company’s growth rate is low, a negative effect of pay gap is observed. However if the company’s growth rate is high, the pay gap has no negative effect.
Summarizing the above results, the effect of the pay gap is positive if the manager understands the cause of the pay gap and recognizes that he can control it. But manager reacts negatively to pay gap if he recognizes that the cause of the pay gap cannot be accepted and controlled. This study contributes by explaining the reason for the conflicting results of previous studies, utilizing Herzberg’s motivation-hygiene theory. Furthermore, this study differentiates itself from prior research by examining the effects of the pay gap within an industry’s competitive environment, thereby controlling for the impact of competitors on firm performance and analyzing the individual corporate performance of competing participants. This research is expected to help companies form a compensation structure that reduces the negative effect of the pay gap and increases its positive effect.
CEO Green Experience and Institutional Investors Site Visits: Evidence from China
Yanqiu Hu , Hongmin Chun
DOI:10.24056/KAR.2026.02.002 KAR Vol.51(No.1) 35-72, 2026
Abstract
This research explores how CEO green experience influences the institutional investors’ site visits. Using the unique setting of China, this study explores the relationship between CEO green experience and institutional investors’ site visits. The findings reveal a significant positive association between CEO green experience and several factors: the likelihood of institutional investors’ site visits, the frequency of site visits, and the number of institutions participating in site visits. Furthermore, this positive association is particularly pronounced in non-pollution focused firms. This finding suggests that institutional investors consider CEO green experience in industries that are less sensitive to environmental issues as a risk factor, which leads institutional investors to increase their monitoring through more frequent site visits. However, this positive association is not significant for state-owned enterprises (SOEs) and firms with CEO duality, yet significant for firms located in the eastern regions, where social capital is relatively high. Further endogeneity-related analyses, including propensity score matching (PSM), entropy balancing, and the two-stage least squares (2SLS) approach, reinforce these major findings. This study enriches the existing literature by identifying CEO green experience as a potential driver of increased institutional investors’ site visits.
Key Words
agency theory, CEO green experience, institutional investors’ site visits, non-pollution focused firms
Optimistic Bias in Analysts’ Earnings Forecasts and Asymmetric Market Reactions to Earnings Surprises 재무분석가 예측치의 낙관적 편향과 어닝 서프라이즈에 대한 시장 반응의 비대칭성
강내철 Naechul Kang
DOI:10.24056/KAR.2026.02.003 KAR Vol.51(No.1) 73-95, 2026
Abstract
This study empirically investigates how the stock market responds to analysts’ earnings forecasts in the context of the Korean capital market. Prior research highlights that earnings surprises play a critical role in corporate performance evaluation and stock valuation. While exceeding analysts’ forecasts typically leads to favorable market reactions, these forecasts are known to contain optimistic biases, often driven by analysts’ incentives to maintain relationships with management. As a result, reported earnings surprises may not fully reflect investors’ perceived surprises. Building on this premise, the study formulates and tests three hypotheses: (1) stock market reactions are asymmetric, with stronger responses to positive surprises than to negative surprises of equal size; (2) small positive surprises trigger disproportionately stronger market reactions due to the impact of forecast bias; and (3) small negative surprises may lead to upward price movements if investors reinterpret them as positive signals after adjusting for optimistic bias. Using a data set of 8,950 firm-year observations from publicly listed companies in Korea between 2012 and 2023, the empirical analysis confirms these hypotheses. The results show that market reactions to positive earnings surprises are significantly stronger than reactions to negative surprises of equal size. Moreover, the strongest reactions occur in cases of small positive surprises, and in the case of small negative surprises, stock prices sometimes move in the opposite direction than implied by the reported surprise. This study contributes to the literature by offering evidence that the Korean stock market disproportionately rewards earnings surprises, taking into account the perceived optimism embedded in analysts’ forecasts. The findings provide new insights into how investors interpret earnings information in an environment where forecast bias is prevalent, thereby offering both theoretical and practical implications.
Macroeconomic Uncertainty and Stock Price Synchronicity 거시경제 불확실성과 주가동조화 현상
박형주 Hyung Ju Park
DOI:10.24056/KAR.2026.02.004 KAR Vol.51(No.1) 97-127, 2026
Abstract
This study empirically investigates the effect of macroeconomic uncertainty on stock price synchronicity. Fluctuations in the macroeconomic environment significantly affect not only corporate management activities but also investor decision-making. In particular, during periods of heightened uncertainty, firms face increased risks and become less inclined to provide forward-looking information such as earnings forecasts due to greater disclosure burdens (Kim et al. 2016). As a result, investors tend to rely more on readily available market- or industry-level information rather than firm-specific information when making investment decision. Against this backdrop, this study examines whether stock price synchronicity increases as macroeconomic uncertainty rises. The empirical findings are as follows. First, greater macroeconomic uncertainty is associated with a higher degree of stock price synchronicity, suggesting that investors under uncertain conditions are more likely to base their decisions on broad market or industry trends rather than firm-specific fundamentals. Second, the positive relationship between macroeconomic uncertainty and stock price synchronicity is more pronounced when the level of information asymmetry is high. This indicates that in environments with limited access to firm-level information, investors increasingly depend on macro-level signals. This study contributes to the literature by providing empirical evidence that macroeconomic uncertainty influences the way information is reflected in capital markets and affects the price formation process. The findings underscore the importance of incorporating macroeconomic conditions into investment strategies and policy considerations.
The Differences of the Audit Fees between Holding Companies and Others 지주회사와 비지주회사 사이의 감사보수 차이
김휘동 Hui Dong Kim , 최종학 Jong-hag Choi
DOI:10.24056/KAR.2026.02.005 KAR Vol.51(No.1) 129-162, 2026
Abstract
The proportion of holding companies have increased dramatically but academic studies rarely examine the issues related to the holding companies. This study investigates whether auditors of holding companies charge higher or lower audit fees. On the one hand, auditors may charge lower fees to the holding companies. It is because audits for holding companies tend to be relatively simple, or because auditors intend to please the holding companies in order to secure additional audit contracts from the subsidiaries of the holding companies. On the other hand, auditors may charge higher fees to holding companies. It is because holding companies are important clients that may bring a lot of visibility and liability to the auditors, and because audits for holding companies are more complex than those for stand-alone companies due to the necessity of communication with the auditors of their subsidiaries. The empirical results support the former predictions. The finding persists even after controlling for the effect of the parent companies which prepare the consolidated financial statements. Furthermore, we find that auditors of the holding companies even charge lower fees when a large portion of the subsidiaries are audited by the auditor of holding company. These findings provide interesting insights for various stakeholders, including policy-makers and shareholders.
Key Words
지주회사, 종속회사, 감사보수, 감사의 복잡성, 대리인 문제, holding company, subsidiary, audit fees, audit complexity, information asymmetry
Does the Investment Strategy of the NPS Predict Corporate Financial Performance? Evidence from Long-Term Performance and FERC 국민연금의 투자전략은 기업의 재무성과를 예측하는가?: 장기성과와 미래이익반응계수에 대한 분석
강나라 Na Ra Kang , 이보미 Bo-mi Lee
DOI:10.24056/KAR.2026.02.006 KAR Vol.51(No.1) 163-189, 2026
Abstract
This study empirically investigates how the strategic equity investments by Korea’s National Pension Service (NPS), the nation’s largest institutional investor, influence firms’ long-term financial performance and the Future Earnings Response Coefficient (FERC). The NPS targets companies expected to demonstrate superior long-term financial outcomes and predictable future earnings, leveraging its substantial capital resources and analytical expertise. As such, its investment decisions naturally serve as strong, positive signals of corporate value to market participants. However, prior research has not thoroughly examined the specific signaling implications of NPS shareholdings within the context of market information environments and corporate valuation processes. This study addresses this gap by comparing Korean listed firms with NPS ownership of 5% or more against those without. Empirical results show firms strategically held by the NPS exhibit significantly better long-term financial performance and higher FERC compared to non-NPS invested firms. The findings suggest that NPS effectively selects firms poised for strong future performance and that its investments inherently convey credible, positive information to market participants. Additionally, strategic investments by the NPS may enhance overall capital market efficiency by improving disclosure quality and reducing information asymmetry. This research provides practical implications not only for policymakers responsible for capital market stability and corporate governance but also for investors seeking reliable indicators of future firm performance.
Key Words
국민연금, 장기 투자, 미래이익반응계수, 예측가능성, National Pension Service, Long-Term Investment, Future Earnings Response Coefficient, Predictability
Does IFRS 18 Operating Income Improve the Earnings Response Coefficient?: Preliminary Evidence for Effectiveness IFRS 18 영업손익은 이익반응계수를 향상시키는가?: 효과성에 대한 예비적 증거
김경순 Kyung-soon Kim , 이진훤 Jin-hwon Lee , 최수영 Su-young Choi
DOI:10.24056/KAR.2026.02.007 KAR Vol.51(No.1) 191-247, 2026
Abstract
This study examines the potential value relevance of operating income under IFRS 18, which mandates explicit presentation of operating income in the income statement and detailed disclosure of management-defined performance measures in the notes, effective January 2027. Unlike other countries, Korea has traditionally reported operating income in the income statement even after the introduction of K-IFRS, so there is market skepticism about whether IFRS 18 will have incremental effects when applied in Korea. Therefore, this study measures and compares the earnings response coefficients for two types of operating income to preliminarily assess whether IFRS 18 operating income can show greater value relevance than the current K-IFRS 1001 operating income. The results of the empirical analysis are summarized as follows. First, IFRS 18 operating income showed a significantly larger earnings response coefficient than K-IFRS 1001 operating income. Second, the earnings response coefficient for IFRS 18 operating income (K-IFRS operating income) showed greater (smaller) sensitivity in companies with a large proportion of intangible assets. These results suggest that operating income reported in accordance with IFRS 18 can at least demonstrate greater value relevance than the current K-IFRS operating income, and that the usefulness of valuation using the residual income model is likely to be enhanced, especially for firms with a large proportion of intangible assets. Overall, the findings are expected to mitigate concerns regarding the benefits and implementation costs of IFRS 18 adoption and contribute to improving investor valuation practices.
Key Words
IFRS 18, K-IFRS 제1001호, 영업손익, 이익반응계수, 무형자산, 초과이익모형, K-IFRS 1001, operating income, earnings response coefficient, intangible assets, residual income model
