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.49No.32024

Current Issue
ESG Performance, Economic Policy Uncertainty, and Labor Investment Efficiency Hongmin Chun , Seunghee Yang 49(3) 1-38, 2024 DOI:10.24056/KAR.2024.06.001 Title ESG Performance, Economic Policy Uncertainty, and Labor Investment Efficiency Hongmin Chun , Seunghee Yang DOI:10.24056/KAR.2024.06.001 KAR Vol.49(No.3) 1-38, 2024 Abstract This study investigates the relation between firms’ environmental, social, and governance (ESG) performance and their labor investment efficiency, where labor investment efficiency is measured by the extent to which labor investment deviates from the level justified by the economic fundamentals of the firms. Using a sample of 6,291 Korean firms from 2011 to 2019, we find that firms with better ESG performance invest more efficiently in human capital, especially by less under-firing and less under-hiring. The role of ESG practices in improving labor investment efficiency is more evident during periods of high economic policy uncertainty. In addition, the relation is more pronounced for firms not affiliated with business conglomerates (i.e., chaebols), for firms operating in less human capital-intensive industries, and in periods under progressive governments. Our findings are robust to the two-stage least squares (2SLS) analyses using foreign investor ownership as an instrument as well as other robustness tests. In summary, our results imply that firms prioritizing ESG factors in their decision-making processes are better able to invest efficiently in their workforce by making more timely and effective employment decisions. Key Words ESG, ESG performance, labor investment efficiency, human resource management, economic policy uncertainty
The Perception of Climate Change Risk and Early-tenure CEOs Batjargal Bolor-erdene 49(3) 39-75, 2024 DOI:10.24056/KAR.2024.06.002 Title The Perception of Climate Change Risk and Early-tenure CEOs Batjargal Bolor-erdene DOI:10.24056/KAR.2024.06.002 KAR Vol.49(No.3) 39-75, 2024 Abstract Recent literature suggests that the tendency for earnings overstatement is more pronounced in the early years of CEOs’ tenure compared to later years, driven by their career concerns (Ali and Zhang 2015). A recent study suggests that the firm’s perception of climate change risk significantly influences economic activities and the future growth of firms (Pankratz et al. 2023). Building on this literature, I investigate the impact of early-tenure CEOs on a firm’s perception of climate change risk. My empirical analyses reveal a negative association between early-tenure CEOs and firms’ perception of climate change risk. Additionally, I find that a heightened perception of climate change risk is associated with greater usage of uncertain language in firms’ annual reports. Furthermore, I find that when early-tenure CEOs perceive a higher climate change risk, they are less likely to choose to cut R&D expenditure. The results remain robust when employing propensity score matching, entropy balancing, incorporating firm and regional fixed effects, and exploring alternative model specifications. The results hold particular robustness for firms led by overconfident CEOs, those with significant equity incentives, non-local CEOs, and high-ability CEOs. This study contributes to the accounting literature by shedding light on the impact of CEO tenure on the perception of firm-level climate change risk. Key Words CEO career concerns, CEO tenure, climate change risk perceptions, early-tenure CEOs
Strategic Stock Repurchases in Response to K-IFRS No. 1116: Implications for Real Earnings Management Strategies Grace Goun Kim , Seul Gi Oh , Jinah Hwang 49(3) 77-101, 2024 DOI:10.24056/KAR.2024.06.003 Title Strategic Stock Repurchases in Response to K-IFRS No. 1116: Implications for Real Earnings Management Strategies Grace Goun Kim , Seul Gi Oh , Jinah Hwang DOI:10.24056/KAR.2024.06.003 KAR Vol.49(No.3) 77-101, 2024 Abstract The new lease accounting standards, K-IFRS No. 1116, have required firms to classify leases, except for short-term or smaller leases, as financial leases. These revised standards have brought significant changes to the financial statements. Based on this, our study investigates how K-IFRS No. 1116 affects firms’ real earnings management, particularly focusing on stock repurchases. Using Korean lease firms from 2017 to 2020, we find that firms with numerous leases tend to engage more in stock repurchases following the new standard, indicating that stock repurchases are employed as a strategy to mitigate the standard’s impact on earnings per share (EPS). Moreover, this effect is more pronounced in cases of lower audit efforts and lower dividend payout ratios, indicating a link to reduced oversight and earnings consistency. Our main findings are consistent even after in the matched sample using the propensity score matching analysis. This study fills a research gap by examining how lease firms respond to K-IFRS No. 1116 and its impact on their stock repurchase decisions. Furthermore, it enhances the overall understanding of the implications of the accounting standard for lease firms and provides practical implications for both policymakers and researchers. Key Words lease, K-IFRS No. 1116, stock repurchases, audit effort, dividend payout
The Effect of Board Diversity on Cost Stickiness Jaehyoung Lee , Kyeongmin Jeon , Hyunpyo Kim 49(3) 103-139, 2024 DOI:10.24056/KAR.2024.06.004 Title The Effect of Board Diversity on Cost Stickiness Jaehyoung Lee , Kyeongmin Jeon , Hyunpyo Kim DOI:10.24056/KAR.2024.06.004 KAR Vol.49(No.3) 103-139, 2024 Abstract This study examines the relationship between board diversity and cost stickiness. The research is unique because we measure board diversity using three individual board composition characteristics: gender, background, and nationality. Using a sample of Korean firms from 2005 to 2020, we find that SG&A costs are less sticky for companies with greater board diversity. Furthermore, we find that the impact of board diversity on cost stickiness is more pronounced in firms with higher agency costs. Overall, our findings contribute to the existing literature by providing evidence that board diversity can enhance the monitoring functions of the company. In other words, the appropriate composition of board diversity may mitigate the agency problem, thereby reducing the degree of SG&A cost stickiness. Key Words board of directors, diversity, cost stickiness