Korean Accounting Review

Print ISSN 1229-3288 | Online ISSN 2508-7193

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.

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Vol.48No.52023

Current Issue
Trend of Earnings Quality and Factors across Different Industries 이익의 질과 영향요인의 산업별 추세 김희주 Heeju Kim , 백원선 Wonsun Paek 48(5) 1-38, 2023 DOI:10.24056/KAR.2023.10.001 Title Trend of Earnings Quality and Factors across Different Industries 이익의 질과 영향요인의 산업별 추세 김희주 Heeju Kim , 백원선 Wonsun Paek DOI:10.24056/KAR.2023.10.001 KAR Vol.48(No.5) 1-38, 2023 Abstract This study examines the effect of the change in regulatory environment and economic factors on earnings quality of firms in five target industries, including finance, pharmaceuticals, steel, electronic components and software. Following prior studies, we identify firm size, loss, one-time items, and intangible expenditures as four key factors to investigate over-time trend of value relevance, revenue-expense matching, and earnings volatility for recent eighteen-year period. We find that firm size is increasing over time in all the target industries and that the percentage of loss firms is decreasing (increasing) in the finance (pharmaceuticals and electronic components) industries. Earnings quality in the finance industry is primarily affected by the IFRS adoption while the effect of one-time items on earnings quality varies across target industries, depending on the components of one-time items. Research and development expenditures affect earnings quality mainly for research and development intensive industries. The overall effect of firm size and loss on earnings quality has weakened over time, and the impact of one-time items and research and development expenditures has become more differential across industries. This suggests that earnings quality is affected by unidentified factors other than the four factors examined or that the traditional role of the four factors is changing over time. This study contributes to literature by comparing the trend of earnings quality across target industries and the relative role of regulation environment and economic factors in explaining earnings quality. Key Words 이익의 질, 경제적 영향요인, 국제회계기준 도입, 산업별 추세, earnings quality, economic factors, IFRS adoption, trend in industry
Analysis of Cross-jurisdictional Income Shifting by Foreign-controlled Firms in Korea 국내 외국인 투자기업의 국가 간 소득이전에 관한 연구 조재희 Jaehee Jo , 정태진 Taejin Jung , 최선화 Sunhwa Choi 48(5) 39-71, 2023 DOI:10.24056/KAR.2023.10.002 Title Analysis of Cross-jurisdictional Income Shifting by Foreign-controlled Firms in Korea 국내 외국인 투자기업의 국가 간 소득이전에 관한 연구 조재희 Jaehee Jo , 정태진 Taejin Jung , 최선화 Sunhwa Choi DOI:10.24056/KAR.2023.10.002 KAR Vol.48(No.5) 39-71, 2023 Abstract This study examines cross-jurisdictional income shifting by foreign-controlled firms in Korea. Specifically, we examine whether and how the difference in the statutory tax rates between foreign countries and Korea influences the inbound and/or outbound income-shifting behavior of foreign-controlled firms. We expect that firms owned by low-tax (high-tax) countries have incentives to shift income out of (into) Korea, thereby maximizing their worldwide after-tax income. Using 21,115 firm-year observations of foreign-controlled firms in Korea from 2006 to 2020, we find that the extent of income shifting increases with the tax incentives. In particular, the income-shifting behavior is asymmetric in that we observe outbound-income shifting by firms owned by low-tax countries but not inbound-income shifting by those owned by high-tax countries. We also provide evidence that the tax-motivated income shifting of foreign-controlled firms has increased during the sample period. Finally, we find that the tax-motivated income shifting is more pronounced for firms with high discretionary expenses and those with more related-party transactions, whereas it is less pronounced for those with high growth opportunities. The results are consistent with the notion that the extent of tax-motivated income shifting varies depending on the flexibility of income shifting strategy and the non-tax cost of future investment opportunities. Overall, our study sheds light on the tax-motivated income shifting of foreign-controlled firms and offers important implications for tax authorities and policymakers who try to limit tax avoidance by multinational corporations. Key Words 다국적기업, 소득이전, 조세회피, 조세유인, multinational corporations, income shifting, tax avoidance, tax incentives, foreign-controlled firms
Compound Financial Instruments and Earnings Management: A Pecking Order Theory Perspective Jeongmin Yu , Dong-hoon Yang 48(5) 73-110, 2023 DOI:10.24056/KAR.2023.10.003 Title Compound Financial Instruments and Earnings Management: A Pecking Order Theory Perspective Jeongmin Yu , Dong-hoon Yang DOI:10.24056/KAR.2023.10.003 KAR Vol.48(No.5) 73-110, 2023 Abstract Compound financial instruments that possess both debt and equity characteristics grant an option for investors to convert the debt instrument into equity, which can ultimately impact the issuing firm’s capital structure and the wealth of existing shareholders. Consequently, firms may be incentivized to engage in earnings management even after issuing the instrument to influence outside investors’ decisions. This study investigates whether firms engage in earnings management when issuing compound financial instruments and whether this behavior aligns with their financing preferences. Using a sample of 3,567 firm-years from the Korean securities market between 2012 and 2019, our results provide empirical evidence that firms with a high preference for equity engage in positive earnings management to encourage investors to exercise their call options. Conversely, firms that prefer debt to equity engage in negative earnings management to decrease the likelihood of investors exercising their call options. These findings suggest that firms are incentivized to strategically manage earnings after the issuance of compound financial instruments in line with their financing preferences, shedding light on the relationship between earnings management and issuing compound financial instruments. Key Words earnings management, compound financial instruments, convertible bonds, bonds with warrants, pecking order theory
Foreign Block Investors and Participation of Female Directors on the Board 대규모 외국인투자자와 여성의 이사회 참여 이상철 Sang Cheol Lee , 이윤근 Yunkeun Lee 48(5) 111-145, 2023 DOI:10.24056/KAR.2023.10.004 Title Foreign Block Investors and Participation of Female Directors on the Board 대규모 외국인투자자와 여성의 이사회 참여 이상철 Sang Cheol Lee , 이윤근 Yunkeun Lee DOI:10.24056/KAR.2023.10.004 KAR Vol.48(No.5) 111-145, 2023 Abstract This study investigates whether the existence of foreign block investors in the firms affects the participation of female directors on the board of directors. Analyzing 3,540 non-financial firm-year data listed on the Korea Stock Exchange for five years(2014-2018), we find that the participation of female directors on the board increases when foreign block investors exist in the firms. In addition, we find that the relationship between the existence of foreign block investors and participation of female directors on the board is greater in companies managed by non-owner CEO rather than in companies managed by owner-CEO. We also find that the relationship between the existence of foreign block investors and participation of female directors on the board is stronger in companies belonging to a conglomerate business group. These test results support that agency problems play moderating roles on the relationship between the existence of foreign block investors and participation of female directors on the board. Furthermore, analyzing 368 firm-year data with female directors on the board, we find that the existence of foreign block investors increases the monitoring characteristics of female directors such as outside director, expertise, tenure and attendance rate. Key Words 대규모 외국인투자자, 여성의 이사회 참여, 대리인문제, 여성이사의 감시 특성, foreign block investors, participation of female directors on the board, agency problems, monitoring characteristics of female directors
Inventory Increase Timing, Persistence of Accruals, and Accrual Anomaly 재고자산 발생액의 증가시기에 따른 지속성 차이와 시장이상현상 김단비 Dahn Bee Kim , 권오홍 Oh Hong Kwon , 윤성수 Sung Soo Yoon 48(5) 147-175, 2023 DOI:10.24056/KAR.2023.10.005 Title Inventory Increase Timing, Persistence of Accruals, and Accrual Anomaly 재고자산 발생액의 증가시기에 따른 지속성 차이와 시장이상현상 김단비 Dahn Bee Kim , 권오홍 Oh Hong Kwon , 윤성수 Sung Soo Yoon DOI:10.24056/KAR.2023.10.005 KAR Vol.48(No.5) 147-175, 2023 Abstract This study identifies the timing of inventory accrual increases based on operating liabilities and examines whether the timing influences the persistence of inventory accruals and whether the market recognizes these differences. Non-financial firms listed on the KOSDAQ and KOSDAQ markets for the period from 2004 to 2020 are used as samples. When we test for differences in the persistence of accruals between the inventory increases made during the period and those at year-end, we find no significant differences. We posit that this is due to the full sample reflecting both positive and negative signals of inventory increases. In order to distinguish between these signals, we compare the persistence of inventory accruals between the firms with earnings management (avoidance of income decreases) incentives and the others. We find that the persistence of inventory increases at year-end is lower (higher) than that during the period for the firms with (without) earnings management incentives. The market, however, appears to overestimate the persistence of inventory increases made at year-end for the earnings management samples, consistent with prior studies. This study contributes to the literature by utilizing operating liabilities to partition inventory increases and showing differences in the persistence of inventory accruals between the firms with and without earnings management incentives. Key Words 기본적 분석, 재고자산 발생액, 이익조정, 시장이상현상, fundamental analysis, inventory accruals, earnings management, market anomaly