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.
Corporate Disclosure and Major Shareholders’ Share Pledging 기업의 자발적 공시와 대주주의 주식담보대출
하원석 Wonsuk Ha , 양승희 Seunghee Yang
DOI:10.24056/KAR.2021.10.001 KAR Vol.46(No.5) 1-40, 2021
Abstract
This study investigates whether and how major shareholders’ share pledging affects firms’ voluntary disclosure behavior. While share pledging, a shareholder’s pledging of stock as collateral for personal bank loans, is an emerging phenomenon worldwide, its economic implications are underexplored in the literature. To fill this void, this study exploits a unique Korean institutional setting where major shareholders’ share pledging is mandatorily disclosed. Using a sample of Korean firms listed in the KOSPI and KOSDAQ exchanges during 2013-2019, we find that pledging firms are less likely than non-pledging firms to provide voluntary disclosure. This tendency is observed only for the disclosure of quantitative rather than qualitative information, and is also more pronounced for the disclosure of bad news than that of good news. These results are consistent with a view that the share pledging of major shareholders can exacerbate agency conflicts between major and minor shareholders. In line with this view, our additional analyses reveal that the negative relation between share pledging and disclosure frequency is more pronounced for firms that are subject to greater intra-shareholder agency conflicts. Collectively, the findings suggest that major shareholders with share pledging induce firms to selectively disclose information to the market, in a manner that serves their private benefits.
Key Words
대리인 문제, 자발적 공시, 주식담보대출, 대주주, agency conflicts, major shareholders, share pledging, voluntary disclosure
Relationship between Effective Tax Planning, Governance and Future After-Tax Earnings 효과적 세무계획, 지배구조와 미래 세후이익의 관계
김영철 Youngchul Kim , 마희영 Heeyoung Ma
DOI:10.24056/KAR.2021.10.002 KAR Vol.46(No.5) 41-83, 2021
Abstract
The Scholes-Wolfson paradigm provides the basis for empirical tax accounting research. Schwab et al. (2019) study presents a measure of tax planning through DEA analysis based on SW paradigm. This study aims to present the method of tax planning in accordance with Schwab et al. (2019) in the environment of Korea and to examine the effectiveness of the tax planning measures by analyzing the relation between tax planning, governance and future after-tax earnings. This study’s results are as follows. First, tax planning has significant negative association with tax risk and positive association with tax avoidance level and profit. Second, effective tax planning increases future after-tax earnings. Third, it was found that future after-tax earnings increases as an effective tax plan is established and the ratio of outside directors, the ratio of institutional investors, and the ratio of foreign investors increases. The results of this study indicate that the tax planning measurement in Schwab et al. (2019) is consistent with SW paradigm and contains tax information different from the long-term CASH ETR used as index explained tax planning and tax avoidance. This study’s contributions are as follows. First, this study reported measurable tax planning in our accounting environment. Second, This study reduce the likelihood of reporting incomplete results with the use of CASH ETR as a tax planning measurement. Third, this study provided an understanding of the firm tax planning activities on tax optimization and results. It also provided an opportunity to estimates of the tax planning to researcher, capital market participants.
Key Words
세무계획, 세후이익 극대화, 세무위험, 미래 세후이익, the effective tax planning, maximizing after tax returns, tax risk, future after-tax earnings
Market Abuse Regulation and the Quality of Analyst Reports in Korea: Evidence from Analyst Characteristics
Sun Young Hwang
DOI:10.24056/KAR.2021.10.003 KAR Vol.46(No.5) 85-130, 2021
Abstract
This study examines the impact of market abuse regulation on the quality of analyst reports in Korea. To compensate for the limitations of the old Capital Market Act, the Market Abuse Regulation provision was incorporated into the revised Capital Market Act and enforced in July 2015. The key feature of the new regulation is that it expands the scope of insider information; punishes not only the direct receiver, but also the n-th receiver of material information that is not released to the public; enables an easier enforcement of punishment becomes easier as the authority can impose monetary penalties without upper limitation. With the samples of analysts issuing reports both in pre- and post-regulation periods, I find that the market abuse regulation decreases the accuracy of analyst and forecast optimism, while it increases forecast dispersion at the analyst level. The effect of the regulation varies with the analysts’ characteristics, such as previous performance, changes in performance, and coverage of firms. Overall, analysts no longer benefit from the selective disclosure of information and have less incentive to maintain their optimism. The evidence indirectly indicates there is no increase in the public information that may substitute the private channels of insider information. Several additional analyses are conducted such as the impact of the regulation on Chaebol-affiliated analysts and the changes in the precision of public and private information and its effect on earnings forecast accuracy after the regulation.
Intangible Value Intensity and Stock Price Crash Risk 기업의 무형가치와 주가폭락위험과의 관련성 연구
박선영 Sun-young Park , 하석태 Seok-tae Ha
DOI:10.24056/KAR.2021.10.004 KAR Vol.46(No.5) 131-163, 2021
Abstract
According to previous studies, firms with a high proportion of intangible assets have high information asymmetry, and firms with high information asymmetry have shown a higher stock price crash risk. Therefore, we suggest that firms with intangible factors that cannot be measured and are not reported in the financial statements are associated with high stock price crash risk. This study investigates the effect of intangible value intensity on the stock price crash risk. In this study, the firm performance that exceeds tangible assets' productivity has been regarded as being created by intangible factors (after here, intangible value). The intangible value of a firm is measured indirectly. We find that the intangible value intensities are significantly associated with the stock price crash risk. These results mean that the higher intangible values that are not recognized in the financial statements are higher the stock price crash risk. Next, we examine how accounting quality affects the relationship between intangible value intensity and stock price crash risk. The finding shows that the higher firms' accounting quality are the lower firms’ stock price crash risk due to intangible value. In addition, the effect of intangible value intensity on stock price crash is highly found among firms in the high intangible expenditures group. These results imply that intangible values are associated with the performance of firms and valuation uncertainty. Therefore, we show that intangible factors at non-financial statements increase the stock price crash risk. Our findings provide implication that the managers of firms with high intangible value should reduce the information asymmetry by increasing the aggressive disclosure and accounting quality. This study is significant in that it not only measures the total intangible value of a company, but also classifies three intangible value intensities.
Key Words
이익기반의 무형의 가치, 무형가치, 무형가치 집중도, 주가폭락위험, 회계품질, earnings-based value of intangible, intangible value intensity, stock price crash risk, accounting quality
Decomposition of Managerial Shareholding: Role of Monetary Incentives and Control Rights in Financial Misreporting
Jae Hwan Ahn
DOI:10.24056/KAR.2021.10.005 KAR Vol.46(No.5) 165-197, 2021
Abstract
Previous research indicates a non-monotonic effect of managerial shareholding on various issues, such as firm value, earnings quality, and debt costs. These studies tend to explain non-linearity in terms of convergence of interests and managerial entrenchment, and use non-linear specifications of managerial shareholding, such as piecewise variables, to capture the countervailing effects. However, such research has been criticized for its arbitrary construction of piecewise variables. This study examines the link between managerial shareholding and misreporting by disentangling shareholding into monetary incentives and control rights, captured using CEO stock delta and voting premium, respectively. Consistent with alignment of interests and managerial entrenchment, it provides consistent evidence that CEOs’ monetary incentives regarding shareholding are negatively associated, whereas CEOs’ voting rights are positively associated with a propensity to misreport. Further analysis indicates that managerial entrenchment arises because owner-CEOs create more favorable conditions for misreporting via the board selection process. Overall, the findings confirm the well-known non-monotonic effect of managerial shareholding with new evidence and additional insights. In particular, the results provide greater assurance of non-linearity in managerial shareholding by revealing its underlying mechanisms without using conventional piecewise variables.
Key Words
control rights, convergence of interests, financial misreporting, managerial entrenchment, managerial shareholding
DOI:10.24056/KAR.2021.10.006 KAR Vol.46(No.5) 199-234, 2021
Abstract
This study investigates how the level of stock return synchronicity affects the financial analyst's ability to predict the target price. High stock return synchronicity means that the stock price of an individual company sufficiently reflects the information about the company to approximate the company's fundamental value and is less likely to deviate from it (Pontiff 2006). Accordingly, we posit that the level of stock return synchronicity of a firm is positively associated with the analysts’ target price forecasting ability. To test our hypotheses, we adopt the R2 measure used in the study of Roll (1988) and Piotroski and Roulstone (2004) to gauge the degree of stock return synchronicity of individual firms. As our financial analyst's forecasting ability measures, we use financial analyst's target price prediction accuracy (TPAFE) and target price achievement (TPMETEND, TPMETANY). We find that the higher the level of stock return synchronicity, the more accurate the financial analyst's target price predictions, and the frequency at which the actual stock price reaches the target price forecast anytime during or at the end of the year increases. After controlling for earnings volatility, information asymmetry, company size, and the number of financial analysts, our results corroborate the results above. The results of our study indicate that the higher the stock return synchronicity, that is, the higher the degree to which individual company information is reflected in the stock price, the higher the information efficiency of the firm, which positively influences the target price forecasting ability of the financial analysts.
The Effect of Theme Audit Review on R&D Accounting: Focusing on Bio-Pharmaceutical Industries 연구개발비 회계처리에 대한 테마감리의 효과: 제약·바이오 산업을 중심으로
양승희 Seunghee Yang , 임지은 Jieun Im
DOI:10.24056/KAR.2021.10.007 KAR Vol.46(No.5) 235-279, 2021
Abstract
This study investigates whether and how bio-pharmaceutical firms’ R&D accounting and the value relevance of these firms’ R&D-related information have changed following the Financial Supervisory Service’s thematic audit review of the R&D accounting. Analyzing Korean listed firms for the period 2015-2019, we find that the R&D capitalization ratio of bio-pharmaceutical firms has been significantly reduced after the audit review. This effect takes place since 2017 when the Financial Supervisory Service released the advance notice regarding the thematic audit review and persists in 2018-2019 due to the release of the supervision guidance in 2018. Investigating changes in the value relevance of R&D information, we find that the value relevance of capitalized R&D expenditures has improved following the thematic review. In additional cross-sectional analyses, the results show that the effect of the audit review is more pronounced for firms with higher pre-audit review capitalization ratio and firms with lower financial reporting quality. We also show that while firms with strong incentives to use a discretion in R&D accounting used to opportunistically capitalize R&D expenditures, such behavior was no longer observed in the post-review period. Collectively, these findings suggest that despite the concern that the audit review would excessively limits firms’ discretion and flexibility in R&D accounting, the informativeness of R&D capitalization has increased.
Key Words
연구개발비, 감리, 자본화, 제약·바이오, research and Ddevelopment, audit review, capitalization, bio-pharmaceutical
DOI:10.24056/KAR.2021.10.008 KAR Vol.46(No.5) 281-320, 2021
Abstract
This study analyzes the value relevance of accounting information for Korean firms pre and post-spread of COVID-19. COVID-19 brought a new form of fear and uncertainty to firms, which drastically increased the volatility of capital markets and exacerbated the financial predicament of companies. A firm's financial distress increases the value relevance of net assets that provide liquidation value and asset abandonment value, while lowering the value relevance of net income, which indicates growth and profitability. However, the crisis in the capital market caused by COVID-19 differs from the 1997 financial crisis in Korea and the 2008 global economic crisis in that it emerged due to an external element of the economy called an epidemic. The results of this study are as follows. First, after the spread of COVID-19, the value relevance of net income declined significantly, and the value relevance of net assets also declined. This suggests that COVID-19 negatively affected the value of net assets, which means liquidation value. Second, the decline in the value relevance of net income is found to be a decline in the value relevance of accruals rather than operating cash flows. This result implies that stakeholders in the capital market prefer information of operating cash flows to accruals under the COVID-19 crisis. Our findings can help various information users in decision making in the era of COVID-19.
Key Words
코비드-19, 코로나 바이러스, 경제위기, 가치관련성, 바이오산업, COVID 19, corona virus, economic crisis, value relevance, bio industry
