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.51No.22026

Current Issue
Audit Opinion Shopping and Real Earnings Management 감사의견구매와 피감기업의 실물이익조정 최종학 Jong-hag Choi , 정희선 Heesun Chung 51(2) 1-34, 2026 DOI:10.24056/KAR.2026.04.001 Title Audit Opinion Shopping and Real Earnings Management 감사의견구매와 피감기업의 실물이익조정 최종학 Jong-hag Choi , 정희선 Heesun Chung DOI:10.24056/KAR.2026.04.001 KAR Vol.51(No.2) 1-34, 2026 Abstract This study investigates how audit clients’ tendency to change auditors in search of a favorable audit opinion influences their use of earnings management techniques. Specifically, it examines whether clients engage more in real earnings management after switching auditors for opinion shopping. Using distressed firms listed on the Korean stock market, the empirical results are summarized as follows: First, clients are more likely to engage in real earnings management after switching auditors for opinion shopping, compared to those who retain their incumbent auditors or change auditors for other reasons. This suggests that new auditors accepting clients with opinion-shopping motives may allow aggressive earnings management, possibly due to compromised independence. Additionally, in conjunction with prior studies indicating that firms engaged in opinion shopping tend to use more accrual-based earnings management, our findings suggest the existence of a complementary relationship between the two earnings management tools. However, the aggressive earnings management behavior disappears when the new auditor is one of the Big 4 audit firms, suggesting that the high-quality audit services provided by Big 4 auditors effectively constrain such aggressive financial reporting. These findings offer valuable insights for regulators seeking to mitigate opinion shopping and curb aggressive earnings management practices. Key Words 감사의견구매, 감사인 교체, 감사인의 독립성, 실물이익조정, Big 4 감사인, audit opinion shopping, auditor change, auditor independence, real earnings management, Big 4 auditor
Auditor Acceptance of Opinion Shopping Clients: The Role of Client Importance 감사인은 의견구매 의도가 있는 중요 고객을 수임하는가? 정희선 Heesun Chung , 이매리 Mary Lee 51(2) 35-64, 2026 DOI:10.24056/KAR.2026.04.002 Title Auditor Acceptance of Opinion Shopping Clients: The Role of Client Importance 감사인은 의견구매 의도가 있는 중요 고객을 수임하는가? 정희선 Heesun Chung , 이매리 Mary Lee DOI:10.24056/KAR.2026.04.002 KAR Vol.51(No.2) 35-64, 2026 Abstract When an audit client dismisses its incumbent auditor and appoints a new auditor who is more likely to issue a favorable audit opinion, the auditor change is referred to as opinion shopping (OS). Regulators around the world have expressed serious concerns about this practice, as it may signal a compromise in auditor independence. Auditors typically weigh the potential benefits and costs when deciding whether to accept a new engagement. This study examines whether client importance influences auditors’ acceptance decisions in the case of OS clients. Two competing hypotheses are considered. On the one hand, if an OS client is important and offers substantial economic benefits, the auditor may be more inclined to accept the engagement. On the other hand, the potential reputational and legal costs of audit failure may deter auditors from accepting important OS clients. Using data on publicly listed firms in Korea, our empirical analysis supports the first hypothesis, indicating that OS behavior can undermine auditor independence. This tendency is particularly pronounced among non-Big 4 auditors, who are more likely to accept important OS clients. These findings provide important implications for regulators and stakeholders, emphasizing the need for stronger safeguards to preserve auditor independence. Key Words 감사의견구매, 감사인 교체, 고객의 중요성, 감사인의 독립성, Big 4 감사인, audit opinion shopping, auditor change, client importance, auditor independence, Big 4 auditor
Ex-ante Indicators Predicting Opportunistic Stock Splits: Historical Accruals Quality and External Capital Raising 기회주의적 주식분할의 예측지표: 과거 발생액 품질과 외부자본조달 김경순 Kyung-soon Kim , 이진훤 Jin-hwon Lee 51(2) 65-115, 2026 DOI:10.24056/KAR.2026.04.003 Title Ex-ante Indicators Predicting Opportunistic Stock Splits: Historical Accruals Quality and External Capital Raising 기회주의적 주식분할의 예측지표: 과거 발생액 품질과 외부자본조달 김경순 Kyung-soon Kim , 이진훤 Jin-hwon Lee DOI:10.24056/KAR.2026.04.003 KAR Vol.51(No.2) 65-115, 2026 Abstract This study investigates whether pre-split accruals quality and external capital raising serve as effective ex-ante predictors of opportunistic stock splits. We hypothesize that stock splits by firms with poor prior accruals quality and high external capital reliance are inherently more opportunistic. Analyzing 357 stock splits from listed companies between 2005 and 2019, our empirical results are as follows: First, firms with poor accruals quality and prior capital raising are significantly more likely to issue equity or debt within one year post-split. Second, these firms exhibit significantly lower cumulative abnormal returns around the announcement date and poorer long-term stock performance compared to their counterparts. Finally, such firms face a higher stock price crash risk following the split announcement. Overall, our findings suggest that a combined indicator of pre-split accruals quality and capital raising can effectively detect firms using stock splits as a false signal to enhance financing efficiency. Key Words 주식분할, 발생액 품질, 외부자본조달, 주가수익률, 주가급락위험, 기회주의, stock splits, accruals quality, external capital raising, stock return, stock price crash risk, opportunism
The Korea Discount: International Evidence on the Interaction of Dividend Policy, Investor Protection, and Earnings Quality 코리아 디스카운트: 주주환원정책, 주주권리보호, 이익의 질 상호작용에 대한 국제 비교 분석 허강성 Kang Sung Hur , 김승준 Seung Jun Kim , 김현태 Hyun Tae Kim 51(2) 117-157, 2026 DOI:10.24056/KAR.2026.04.004 Title The Korea Discount: International Evidence on the Interaction of Dividend Policy, Investor Protection, and Earnings Quality 코리아 디스카운트: 주주환원정책, 주주권리보호, 이익의 질 상호작용에 대한 국제 비교 분석 허강성 Kang Sung Hur , 김승준 Seung Jun Kim , 김현태 Hyun Tae Kim DOI:10.24056/KAR.2026.04.004 KAR Vol.51(No.2) 117-157, 2026 Abstract The phenomenon of the “Korea discount,” a structural undervaluation of Korean listed firms, has weakened the competitiveness of the domestic capital market, reduced foreign investment, and increased corporate capital costs. Previous academic and practical discussions have primarily focused on individual factors, such as low dividend payout ratios, accounting opacity, and weak institutional protection of shareholder rights. However, capital market valuation is shaped by the interaction among these factors, which may reinforce or offset one another. This study examines how dividend policy, earnings quality, and shareholder rights protection jointly affect firm value and uses a cross-country approach to identify the causes of the Korea discount. Using 86,730 firm-year observations from 28 countries for 2013-2022, obtained from the Compustat Global database, we find that Korean firms exhibit significantly lower Tobin’s Q than comparable firms in other countries, confirming the existence of the Korea discount. Although dividend payments are generally associated with higher firm value, Korean firms show a negative association between dividends and firm value. However, among Korean firms with high earnings quality, the negative association between dividends and firm value is significantly attenuated, whereas dividends do not improve firm valuation when earnings quality is low. We also find that high-quality earnings alone do not lead to higher firm value unless accompanied by strong legal and institutional protection for shareholders. These results suggest that resolving the Korea discount requires not only dividend expansion but also improved accounting transparency and stronger investor protection. Key Words 코리아 디스카운트, 주주환원정책, 배당, 이익의 질, 기업가치, 토빈의 Q, Korea discount, dividend policy, dividend, earnings quality, market value, Tobin’s Q
Communication between External Auditors and Governance Personnel, and Disclosure Quality Yujin Kim , Jiyeun Hong 51(2) 159-182, 2026 DOI:10.24056/KAR.2026.04.005 Title Communication between External Auditors and Governance Personnel, and Disclosure Quality Yujin Kim , Jiyeun Hong DOI:10.24056/KAR.2026.04.005 KAR Vol.51(No.2) 159-182, 2026 Abstract This study examines the impact of communication between external auditors and governance personnel on the quality of corporate disclosure, focusing on Korea’s revised Act on External Audit, which mandates enhanced communication standards. The findings show that more frequent interactions lead to higher-quality fair disclosures, which are essential for ensuring transparency and investor confidence. Importantly, the study highlights that face-to-face communication has a stronger positive influence on disclosure quality than text-based formats like emails or written reports. This suggests that the manner of communication, not just its frequency, plays a crucial role. The research identifies disclosure quality as a key mediating mechanism through which auditor-governance communication affects broader capital market outcomes, such as stock price stability and bond credit ratings. By focusing on this intermediate process, the study contributes to the literature by linking communication practices to final market effects, thus filling a notable gap in prior research. From a policy standpoint, the findings emphasize the need to promote regular and direct auditor-management dialogue as a means to strengthen audit effectiveness, foster transparency, and ensure more reliable and accountable corporate reporting. Key Words auditor, audit committee, communication, disclosure quality