정준희 Joon Hei Cheung , 김승준 Seung Jun Kim , 박정필 Jung Phil Park

DOI: KAR Vol.49(No.6) 1-31, 2024

Abstract

This study investigates the impact of the 2018 adoption of IFRS 9 on the South Korean capital market and economy. It examines whether the increased managerial discretion resulting from IFRS 9 adoption has led to enhanced earnings management and capital management. Additionally, it evaluates whether IFRS 9 has achieved its primary objective of mitigating the procyclicality of bank lending. This analysis provides a comprehensive assessment of the effects of IFRS 9 adoption on the domestic economy and capital market. The empirical findings are as follows. First, there was an increase in banks’ earnings management and capital management practices after the adoption of IFRS 9. Second, the procyclicality of loan assets diminished following the adoption of IFRS 9, suggesting that its primary objective has been partially fulfilled. This study contributes to the literature by offering a thorough analysis of various accounting issues related to managerial behavior (earnings management and capital management) and changes in bank lending behavior in response to regulatory changes introduced by IFRS 9. It provides empirical evidence on the effects of IFRS 9 adoption, highlighting its importance.

Key Words

IFRS 9, 이익관리, 자본 관리, 대손충당금, 경기순응성, IAS 39, earnings management, capital management, procyclicality

김희주 Heeju Kim , 이종은 Jong Eun Lee , 유현정 Hyunjeong Yoo

DOI: KAR Vol.49(No.6) 33-80, 2024

Abstract

This study explores the relation between changes in audit procedures, audit risk, and audit quality from the perspective of auditors’ professional commitment, by utilizing the revised annual reports of 2020, which mandate the disclosure both contractual and actual audit hours (fees). Specifically, we define the actual audit hours exceeding the contractual one as a proxy for strategic audit procedures responding to increased audit risk during audit engagement, and empirically analyze this. Based on literature, we use discretionary accruals and audit report lag as proxies for audit quality. The sample for analysis consists of listed non-financial firms from 2018 to 2020. We identify a positive relation between additional audit hours and audit risk, and further observe that firms with additional audit hours demonstrate significantly higher audit quality compared to those without. These results suggest that additional audit hours reflect auditors’ voluntary efforts to address unforeseen or elevated audit risks, rather than deficiencies in audit planning. Furthermore, supporting evidence is strengthened through an analysis of Covid19 as a novel external audit risk during the sample period, analyses using propensity score matching samples, and examinations of abnormal audit hours (fees). This study differentiates and contributes to literature by providing evidence on the reasons and consequences of auditors’ voluntary efforts from the perspective of auditors’ professional commitment.

Key Words

계약감사시간, 초과감사시간, 감사위험, 자발적 노력, 감사품질, contractual audit hours, additional audit hours, audit risk, voluntary audit efforts, audit quality

이상철 Sang Cheol Lee , 윤종철 Jong Chul Yoon , 하미란 Mi Ran Ha

DOI: KAR Vol.49(No.6) 81-122, 2024

Abstract

We analyze the effect of the foreign investor’s share on the adoption of compensation committee. At the same time, we investigate the effects of foreign investor’s share on the independence, expertise, and comprehensive measure of the compensation committee. Using 6,829 firm-year data for non-financial companies listed on the Korea Stock Exchange from 2013 to 2022, we perform logistic regression and ordinary least squares regression. We first find that the higher the foreign investor’s share, the higher the likelihood of adopting a compensation committee. Second, we find that the higher the foreign investor’s share, the higher the ratio of outside directors on the compensation committee while the lower the likelihood that the CEO participates in the compensation committee. Third, we unveil that the higher the foreign investor’s share, the higher the likelihood that accounting and financial experts or female directors participate in the compensation committee. Finally, we uncover that the higher the foreign investor’s share, the higher the comprehensive measure of the compensation committee. These test results imply that foreign investors contribute to the adoption and effective composition of compensation committee.

Key Words

외국인투자자, 보상위원회, 독립성, 전문성, 종합적 측정치, foreign investors, compensation committee, independence, expertise, comprehensive measure

강나라 Na Ra Kang , 김현태 Hyun Tae Kim

DOI: KAR Vol.49(No.6) 123-152, 2024

Abstract

This research focuses on the paradox involving the remeasurement of defined benefit obligations, observed in the other comprehensive income section, and its implications for value relevance. Typically, a paradox refers to unexpected outcomes in seemingly contradictory situations, often contrary to common sense. In this study, it is noted that as comprehensive income from the remeasurement of defined benefit obligations increases, paradoxically, stock prices tend to decrease. This phenomenon is particularly noticeable when net income is low. It is hypothesized that if the reaction to low net income leads to a reduction in debt characterized as provisions, it would be difficult to expect stock prices to rise due to this debt reduction. The study further suggests that the occurrence of comprehensive income from remeasurement is likely when companies are facing deteriorating management conditions, such as low salary increases and reduced incentives for long-term employee retention. Despite the increase in asset values theoretically suggested by the Ohlson model, where value is explained by a weighted sum of earnings and asset value, this study reveals that comprehensive income from remeasurement shows an inverse value relevance. This discovery provides new perspectives for investors and regulators on interpreting and making reporting decisions about other comprehensive income.

Key Words

기타포괄손익, 가치관련성, 퇴직급여채무, 역설, other comprehensive income, value relevance, defined benefit liability, paradox

박종일 Jong Il Park , 정선문 Sun Moon Jung , 이윤정 Yun Jeong Lee

DOI: KAR Vol.49(No.6) 153-200, 2024

Abstract

This study investigates whether the phased implementation (in 2019, 2020, and 2022) of internal accounting control system audits for companies of different asset sizes enhances earnings informativeness from investors’ perspective, using the earnings response coefficient (ERC). Listed companies were analyzed from 2017 to 2022, yielding the following findings: Investors recognized improved earnings informativeness after the introduction of these audits, as shown by a significant increase in the ERC relative to stock prices. This improvement was primarily driven by mid-sized companies (asset size between KRW 100 billion and KRW 500 billion) that adopted the audits in 2022. The results were robust across different research model specifications and dependent variable measurements. Regardless of auditor size, audit fee change rates, or information environments, the adoption of these audits led to an increased ERC, especially for mid-sized companies. Collectively, our findings suggest that the phased implementation of these audits by regulatory authorities did not increase the ERC across all asset-size groups. Instead, investors perceived the adoption as enhancing earnings informativeness more for smaller mid-sized companies than for larger ones. This finding offers significant implications for regulatory authorities regarding the efficacy of implementing internal accounting control systems and contributes to the literature by analyzing investors’ reactions to such audits.

Key Words

내부회계관리제도 감사, 이익정보력, 이익반응계수, 자산규모, 감사보수, audit of internal accounting control system, improved earnings informativeness, earning response coefficient, asset size, audit fees

강나라 Na Ra Kang , 김현태 Hyun Tae Kim

DOI: KAR Vol.49(No.6) 201-230, 2024

Abstract

Since the 1970s, U.S. executive compensation has risen significantly, generating interest in its link to corporate performance. Two views exist: one sees it as optimal contract design reducing agency costs; the other views it as executives exploiting their positions. Unlike the U.S., Korea hasn’t seen such rapid compensation growth, with rewards mainly in cash, not stock options, making it difficult to apply U.S. findings to Korea. This study examines the relationship between executive salaries and future shareholder value in Korea, diverging from overseas research. It also explores whether this relationship varies under adverse managerial conditions, using prospect theory, which contrasts with the agency theory perspective of most prior studies. Prospect theory suggests that loss aversion differs from the pursuit of gains. When performance worsens, executives risk losing their jobs and are more sensitive to potential salary loss than to additional rewards from good performance. Thus, the study posits that the link between executive compensation and future corporate performance is stronger under challenging conditions. Empirical analysis shows a positive relationship between executive compensation and the following year’s stock returns as well as earnings, especially in difficult management environments. This study contributes by analyzing the compensation-performance link through prospect theory, focusing on Korean companies with a distinct compensation system from the U.S. The findings aim to enhance understanding of executive compensation and provide insights for designing appropriate compensation structures.

Key Words

경영자 보상, 전망이론, 대리인 이론, 주주가치, executive compensation, prospect theory, agency theory, shareholder value

신혜정 Hyejeong Shin , 김유진 Yujin Kim

DOI: KAR Vol.49(No.6) 231-260, 2024

Abstract

This study aims to examine the impact of employees, a primary internal stakeholder of corporations, on bond ratings. Despite the recognition that credit rating agencies consider various non-financial factors, including management and major governance structures, in evaluating corporate bond credit ratings, research on the role of employees, who actually carry out business operations and generate outcomes, is limited. This research investigates the effect of employee tenure and compensation plan on credit ratings. The findings indicate that longer employee tenure is associated with higher corporate bond credit ratings, suggesting that long employee tenure may serve as a signal of corporate stability or reflect the expertise of long-tenured employees, which in turn influences the company’s financial performance and credit ratings. However, the positive impact of tenure on credit ratings diminishes with greater employee power through stock ownership existence and relative higher compensation levels compared to executives. This suggests that creditors negatively perceive the possibility of imbalance of power between employees and management. This study provides meaningful evidence of the role of key internal stakeholder, as emphasized in the recent ESG concept, by considering employee characteristics as significant factors in the evaluation of corporate bond credit ratings. By extending the research scope of accounting to include the capital market connection beyond traditional areas of focus such as management and major shareholders, this research verifies the determinants of credit ratings from the perspective of employees.

Key Words

종업원 근속연수, 우리사주지분율, 임원 대비 종업원의 보상 수준, 신용등급, employee tenure, employee stock ownership, executive-employee pay gap, credit ratings

Sung-kyoo Kim , Mi-ok Kim , Hyung-rok Jung

DOI: KAR Vol.49(No.6) 261-261, 2024

Abstract

Key Words