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.
Can Taxes Mitigate the Decline in Employment under Macroeconomic Uncertainty? 거시경제 불확실성으로 인한 고용 위축 문제를 세금으로 해결할 수 있는가?
기은선 Eunsun Ki , 허우경 Wookyung Heo
DOI:10.24056/KAR.2025.06.001 KAR Vol.50(No.3) 1-29, 2025
Abstract
This study investigates the effectiveness of employment tax credits as a business adjustment mechanism during periods of high macroeconomic uncertainty. While existing literature consistently finds employment tax credits to be effective in promoting employment, their interaction with macroeconomic uncertainty remains underexplored. We address this gap by analyzing data from 10,273 non-financial Korean listed companies that reported earnings between 2010 and 2022. The Economic Policy Uncertainty Index (EPUI) by Baker et al. (2016) serves as our measure of macroeconomic uncertainty. Our empirical results reveal that higher macroeconomic uncertainty is associated with lower total and full-time employment, and higher part-time employment. This suggests that firms respond to uncertainty by substituting full-time positions with part-time roles, likely to reduce potential future costs. Importantly, we find that the negative relationship between macroeconomic uncertainty and employment levels is moderated by the expansion of employment tax credits. Specifically, in years when these tax credits w ere enhanced, the adverse impact of macroeconomic uncertainty on total and full-time employment is significantly weakened. These findings indicate that employment tax credits not only incentivize employment under normal conditions but also serve as an effective policy tool to buffer employment losses in uncertain economic environments. Our study contributes to the literature by highlighting the role of tax incentives as a stabilizing mechanism during times of heightened economic uncertainty.
Mandatory External Audit for Internal Control System and Firm's Operational Efficiency 내부통제제도에 대한 외부감사와 기업의 운영 효율성
이혜영 Hye-yeong Lee , 최종학 Jong-hag Choi
DOI:10.24056/KAR.2025.06.002 KAR Vol.50(No.3) 31-63, 2025
Abstract
Though external auditor reviews for internal control systems of Korean listed firms have been in place for the past 15 years, it was mandated in 2019 that audit client firms’ internal control systems must be audited. This paper investigates whether the mandated external audit for the internal control system has any effect on a firm's operational efficiency. Here, operational efficiency is measured by the data envelopment analysis developed by Demerjian et al.(2012). We use small listed firms that were not required to be audited as a control group in our difference-in-differences analysis. The empirical results reveal that the operational efficiencies improve after the adoption of the mandatory external audit for the subset of the selected firms, with the exception of larger firms whose asset size is greater than 2 trillion Korean won. In contrast, the proportion of the selling and administrative expenses out of the sales increase for all firms. The increase of audit costs, as well as labor costs for those who handle internal control related-tasks, may potentially explain this increase of selling and administrative cost. These findings provide important policy implications in demonstrating the benefits of the mandated audits for internal control system.
Key Words
내부통제제도, 감사, 검토, 운영 효율성, internal control system, audit, review, operational efficiency
Tax Effect and Ex-Dividend Day Pricing Related to Distribution from Reduced Capital Reserves 주가조정에 반영되는 자본준비금 감액배당의 세금효과
심해린 Haerin Shim , 최기호 Kiho Choi
DOI:10.24056/KAR.2025.06.003 KAR Vol.50(No.3) 65-109, 2025
Abstract
Dividends based on retained earnings are taxed as dividend income when they are distributed to shareholders. However, dividends from reduced capital reserves are considered a return of capital and are not taxed under current Korean tax law. Therefore, firms can utilize distributions from reduced capital reserves as a means to increase firm value through tax effects favorable to shareholders. This study examines the status of dividends from reduced capital reserves in Korean listed companies and empirically analyzes whether dividends from reduced capital reserves affect firm value (stock prices). This study conducts empirical analyses on Korean listed companies that paid cash dividends from 2012 to 2021. After selecting a group of firms that paid dividends from reduced capital reserves and a comparison group with similar firm characteristics through propensity score matching, we examine whether there is a significant difference in the stock price decline on the ex-dividend day between the two groups using t-tests and multiple regression analysis. We find that differences in tax effects between dividends from reduced capital reserves and dividends based on retained earnings are reflected in stock prices on the ex-dividend day. This study contributes to the policy discussion surrounding tax law revisions related to dividends from reduced capital reserves by confirming that dividends from reduced capital reserves can be used as a means to increase firm value through favorable taxation to shareholders. It also contributes to prior research on stock price adjustments on the ex-dividend day and existing literature on tax effects reflected in the capital market (tax capitalization hypothesis). In addition, this study proposes a methodology to estimate the amount of dividends from reduced capital reserves by using financial statements and other relevant data sources, thereby contributing to collecting primary data for future empirical studies on firms’ dividend distributions from reduced capital reserves.
Key Words
기업가치, 배당, 자본준비금 감액배당, 배당소득세, 배당락, 세금효과, firm value, dividends, distribution from reduced capital reserves, dividend tax, ex-dividend day pricing, tax effect
DOI:10.24056/KAR.2025.06.004 KAR Vol.50(No.3) 111-152, 2025
Abstract
This study examines the relationship between CEO influence and the board's voluntary use of committees that are not required by regulations. To borrow a framework from the organizational decision-making literature, boards of directors are multi-agent multi-task systems. Without an explicit hierarchy to impose a committee structure on directors, boards are decentralized systems, which potentially leads to fewer board committees due to directors’ aversion to heightened accountability (i.e., free-riding). We posit that the CEO's influence in the board can be a centralizing force in this decision-making process, thus encouraging the board to have more committees because the CEO benefits from the enhancement of its effectiveness through non-required committees that likely play advisory roles. Consistent with this prediction, we find CEO/chair duality, a proxy for CEO influence, to be positively associated with the use of non-required committees. This finding is more pronounced among the firms with lower levels of excess CEO compensation, which supports CEO influence working as a stewardship mechanism. Overall, our findings contribute to the literature by suggesting a potential channel that reflects advantages of insider control, which is a perspective that regulators often neglect.
Key Words
board of directors, board committees, CEO duality, multi-agent multi-task system, centralized decision-making
Pay for Luck and Executive Compensation 운에 의한 성과와 경영자 보상
황주희 Juhee Hwang , 유하경 Hagyeong Yu , 진석호 Sukho Jin
DOI:10.24056/KAR.2025.06.005 KAR Vol.50(No.3) 153-182, 2025
Abstract
This study examines the impact of uncontrollable luck factors on executive compensation. Executive compensation is closely tied to firm performance, which is influenced not only by managerial ability but also by uncontrollable luck factors such as market fluctuations and industry trends. To capture the effects of luck and skill factors more precisely, this study separates firm performance into luck-based and skill-based components and analyzes their respective relationships with changes in executive compensation. Using data on CEO compensation disclosures from 2013 to 2022 for publicly listed firms, we find a significant positive relationship between performance attributed to luck and executive compensation. In other words, executive pay increases not only due to skill factors like managerial ability but also in response to firm performance improvements driven by external market and industry influences. Furthermore, this relationship holds symmetrically, meaning that compensation decreases when luck factors negatively affect firm performance, rather than being asymmetrically protected against downturns. This effect is especially pronounced for professional CEOs compared to owner CEOs, suggesting differences in governance structures and monitoring. Various robustness checks, including alternative performance specifications and empirical approaches, confirm the validity and consistency of the results. These findings provide practical implications for designing transparent and fair executive compensation systems, ensuring that pay structures align with both performance and corporate governance objectives.
Key Words
경영자 보상, 운에 의한 성과, 전문경영자, 소유경영자, Executive compensation, Pay-for-luck, Professional CEO, Owner CEO
XBRL Adoption and Stock Return Synchronicity XBRL 도입이 주가동조성에 미치는 영향
신혜정 Hyejeong Shin
DOI:10.24056/KAR.2025.06.006 KAR Vol.50(No.3) 183-215, 2025
Abstract
This study examines the impact of XBRL adoption on stock return synchronicity. It is expected that XBRL-based financial reporting will reduce investors’ information processing costs, thereby mitigating information asymmetry between firms and investors. From this perspective, this study analyzes the relationship between XBRL adoption and stock return synchronicity using the firms listed on KOSPI from 2011 to 2021. The analysis results are as follows. First, stock return synchronicity increased in the post- XBRL period; however a higher ratio of standard tags attenuated this increase in post-XBRL period. These results suggest that the effectiveness of XBRL in enhancing information efficiency depends on the quality of XBRL rather than XBRL adoption itself. Next, the study examines whether the effects of XBRL adoption differ by investors’ ex-ante information processing costs. The results indicate that the negative impact of the standard tag ratio on stock return synchronicity in the post-period is more pronounced for firms with higher foreign ownership. This implies that XBRL adoption enhances the information efficiency of sophisticated investors but not retail investors. This study extends prior research on XBRL by examining its effects on the capital market. Furthermore, the findings that the impact of XBRL differs among investors suggest the information asymmetry among investor groups and indicate further improvements in the implementation of XBRL are needed. Additionally, it sheds light on the effectiveness of XBRL-based reporting under the IFRS regime, providing a basis for future studies.
