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.
The Increased Informativeness of Revenue and Trade Credit Financing: Evidence from the Comparison Between Listed and Private Firms in South Korea Before and After the Implementation of IFRS 15
Hyoung Seok Choo
DOI:10.24056/KAR.2026.08.001 KAR Vol.51(No.4) 1-36, 2026
Abstract
This study examines the real effects of IFRS 15 on trade credit financing. Using a generalized difference-in-differences (DiD) design, this study exploits a unique South Korean setting, comparing listed firms (mandated adopters) with private firms (exempted) from 2011 to 2023. After applying propensity score matching and entropy balancing to a sample of 39,657 firm-year observations, this study finds that mandated adoption of IFRS 15 leads to a significant decrease in buyer-side trade credit financing. This study posits that the result is driven by an information channel. The enhanced revenue informativeness from IFRS 15 reduces information asymmetry, lowering the cost of traditional debt financing and enabling firms to substitute away from trade credit that has high implicit costs. This paper validates this mechanism by providing a battery of robustness checks and showing a significant reduction in the cost of debt in post-IFRS 15 for the treatment group. The effect is more pronounced for firms with a complex revenue recognition environment, low reporting quality, high economic policy uncertainty, and industries that are expected to be materially affected. Moreover, in mechanism test, this study provides the evidence of major assumption that high informational quality of revenue enables firms to enjoy better borrowing choices by showing the negative relationship between revenue volatility and IFRS 15 adopted firms, compared to non-adopted firms. This paper provides novel evidence on the real economic consequences of the new revenue standard, providing the practical implication of decision-usefulness of changed revenue recognition standard.
The Relationship between Net Worth of Basic Local Governments and Regional Economic Growth During Crises 위기상황에서 기초지방자치단체 순자산과 지역경제 성장의 관계에 관한 연구
김봉환 Bong Hwan Kim , 이해인 Hae In Lee
DOI:10.24056/KAR.2026.08.002 KAR Vol.51(No.4) 37-79, 2026
Abstract
This study empirically analyzes the relationship between local governments’ net worth and regional economic growth during the economic crisis caused by COVID-19, proposing the potential use of net worth as a new fiscal indicator. Net worth, defined as total assets minus liabilities, is a key accrual-based stock indicator in the IMF's Government Finance Statistics that reflects fiscal soundness and sustainability, yet it has received limited attention in Korea. The analysis is based on panel data covering 226 basic local governments over the period from 2014 to 2020. Using a fixed-effects model, the results show that both the amount and the ratio of net worth had a stronger impact on the following year's per capita Gross Regional Domestic Product during the COVID-19 crisis. This finding indicates that local governments with higher net worth experience greater economic growth during national crises. From an asset perspective, nonfinancial assets support production activities, public service provision, and crisis response capacity, thereby facilitating economic recovery. In addition, increases in net worth enhance potential borrowing capacity and financing ability, strengthening proactive fiscal execution, which in turn promotes economic growth in the subsequent year, particularly during crises. Further analysis reveals that net worth significantly influences the rate of change in expenditures in the following year. It helps mitigate expenditure cuts or enhance spending increases during crises. By adopting a stock-based accrual approach centered on net worth, this study suggests a pathway for improving local government finances, revitalizing the regional economy, and enhancing crisis resilience.
DOI:10.24056/KAR.2026.08.003 KAR Vol.51(No.4) 81-124, 2026
Abstract
This study examines whether IFRS 15, Revenue from Contracts with Customers, mitigates firm-specific stock price crash risk by improving the revenue-reporting environment. Using a panel of 19,246 firm-year observations for KOSPI and KOSDAQ non-financial firms from 2011 to 2023 in Korea, we test whether the post-IFRS 15 regime is associated with lower crash risk, measured primarily by the negative conditional skewness of firm-specific weekly returns. Our baseline regressions show that the IFRS 15 indicator is significantly and negatively associated with subsequent crash risk, implying an economically meaningful negative relationship in downside tail risk and after the new standard's implementation. Dynamic analyses further reveal that this effect materializes only after 2018, consistent with a significant impact of the new revenue standard. The main findings are robust to controlling for the various confounding factors, and addressing endogeneity concerns. The results remain qualitatively the same even after using alternative measures of stock price crash risk. Additional tests indicate that the negative association between crash risk and the effect of IFRS 15 is more pronounced for KOSPI firms, more pronounced in periods of high economic policy uncertainty, and more pronounced for firms belong to the industries that are expected to be materially affected. Overall, the results suggest that IFRS 15 enhances the informativeness and credibility of revenue information and thereby curbs managers’ bad-news hoarding behavior, resulting in lowering stock price crash risk.
Key Words
IFRS 15, stock price crash risk, information asymmetry, revenue
The Impact of External Audit Environment on Deferred Tax Asset Recognition: Focusing on Auditor Designation and Audit Effort 외부감사환경과 이연법인세자산 인식: 감사인 지정과 감사노력을 중심으로
백인영 Inyoung Baik
DOI:10.24056/KAR.2026.08.004 KAR Vol.51(No.4) 125-175, 2026
Abstract
This study empirically examines how characteristics of the external audit environment ― including auditor designation and audit effort ― are associated with firms’ deferred tax asset (DTA) recognition rates, which reflect significant managerial discretion. DTAs provide useful accounting information for forecasting future cash flows, yet their recognition involves managerial judgment regarding the probability of future taxable profits. Based on business reports of firms listed on the KOSPI and KOSDAQ markets from 2011 to 2022, we obtain the following findings. First, mandatory auditor designation is associated with significantly lower DTA recognition rates, suggesting more conservative recognition under stricter audits. In contrast, periodic auditor designation is positively associated with DTA recognition rates, possibly because periodically designated firms tend to have more stable financial conditions and better prospects for future taxable profits. Second, firms undergoing an initial audit recognize DTAs more conservatively, which may reflect stricter audit procedures following an auditor change. Third, higher audit hours, audit fees, and audit fees per hour are associated with lower DTA recognition rates, suggesting that greater audit effort may restrict aggressive recognition practices. This study contributes to the literature by empirically examining the relationship between the external audit environment, proxied by auditor designation and audit effort, and DTA recognition. It also shows that DTA recognition differs depending on the reason for auditor designation. By manually analyzing income tax expense footnotes, this study provides detailed evidence on managerial discretion in DTA recognition and offers practical implications for auditors, managers, regulators, and policymakers.
Comparing the Usefulness of Cash Effective Tax Rates as Measures of Tax Avoidance 조세회피 측정치로서의 현금유효세율들의 유용성 비교
심해린 Haerin Shim , 유지선 Jiseon Yoo , 최기호 Kiho Choi
DOI:10.24056/KAR.2026.08.005 KAR Vol.51(No.4) 177-212, 2026
Abstract
The cash effective tax rate (CETR), a traditional measure of tax avoidance, has a numerator of taxes paid and a denominator of pre-tax accounting income (ye). This measure has the disadvantage of failing to detect conforming tax avoidance. Consequently, alternatives such as CETR(yc), which uses net cash flow as the denominator, and CETR(ym), which uses total assets as the denominator, have been proposed, but are not widely used. We compare the utility of these three CETRs and assess whether yc and ym can serve as alternative measures to ye. For empirical analysis, we select a sample of 10,248 firm-years of listed Korean companies and conduct Monte Carlo simulations. We artificially introduce tax avoidance firms and run a regression with each CETR as the dependent variable 1,000 times. The average t-statistic of the tax avoidance coefficient is used as a measure of utility. We find that in a multiple regression equation with profit variables controlled, the three measures did not show consistent differences in t-statistics in both conforming and disconforming tax avoidance situations. This is because the three measures did not differ in measuring abnormal tax avoidance, and although ye and yc seemingly have a high numerator-denominator correlation, they did not differ in reliability from the actual ym due to artificial adjustments such as Winsorization. These results suggest that ye, the traditional CETR, is useful even in conforming tax avoidance situations, and that yc and ym, which use cash flow or total assets as denominators, can complement ye.
On the Role of Jour-Analysts in Capital Market Information Intermediation
Minkwan Ahn
DOI:10.24056/KAR.2026.08.006 KAR Vol.51(No.4) 213-254, 2026
Abstract
We examine how earnings press releases influence the content of journalists’ articles that directly follow earnings releases. We introduce the term “jour-analysts” to describe those who provide journalistic analysis. We use the degree of cosine dissimilarity (i.e., 1 - similarity) between the text of news articles and earnings press releases to measure the amount of journalistic analysis in jour-analysts’ news articles. We document that earnings-related (forward-looking) journalistic analysis is negatively (positively) related to abnormal stock returns, price discovery, abnormal volume, and analyst forecast revisions. We also find that forward-looking quantitative information in news articles is associated with higher abnormal returns, intraperiod timeliness, and analyst forecast revisions. Further, forecast-like (i.e., both quantitative and earnings-related) forward-looking statements have a positive effect on equity market reactions, but only for firms with higher information asymmetry. Overall, we find that jour-analysts add very little to investors’ understanding of earnings-related news but that jour-analysts enrich investors’ understanding of forward-looking news. Taken as a whole, the evidence we present suggests that jour-analysts primarily add to investors’ understanding of the firm through an analysis of the firm's future prospects.
Key Words
business journalism, media, price discovery, volume, returns, earnings
The Effect of Mandatory Disclosure of Corporate Governance Report on Firms’ Matching Principle: Focusing on Revenue-Expense Matching
Hyoung Seok Choo , Hansol Lee
DOI:10.24056/KAR.2026.08.007 KAR Vol.51(No.4) 255-295, 2026
Abstract
This study examines whether the mandatory Corporate Governance Report disclosure regime in Korea enhances revenue-expense matching, a fundamental property of earnings quality. Using a staggered difference-in-differences design on a sample of KOSPI-listed firms from 2011 to 2021, the study finds that firms subject to the mandate exhibit a significantly stronger contemporaneous association between revenues and expenses relative to non-subject firms. The main finding shows qualitatively the same results for robust alternative fixed-effects models and constant sample. This improvement is robust to controlling for concurrent regulatory shocks, including the New External Audit Act, and persists in stringent fixed-effects specifications. Cross-sectional tests reveal that the effect is most pronounced in firms with low foreign ownership, suggesting that regulatory intervention substitutes for weak external monitoring. Furthermore, this study documents that substantive compliance with Board of Directors indicators, rather than mere checkbox adherence, is the primary channel driving this improvement. The findings suggest that mandatory governance disclosure imposes reputational and monitoring costs that discipline internal controls, thereby generating positive spillovers for financial reporting quality. These results provide policy implications for the efficacy of corporate governance disclosure regimes in emerging markets.
A Re-examination of the Effectiveness of the Undistributed Corporate Income Tax System: F ocusing on t he A llocation of I nternally Generated Cash F low between Expenditures and Retained Earnings 미환류소득 세제 효과성 재검토: 내부적으로 창출된 현금흐름을 이용한 환류대상 지출과 미환류소득 간의 상대적 비중을 중심으로
한정일 Jung-il Han , 홍영은 Young-eun Hong , 우혜진 Hye-jin Wu
DOI:10.24056/KAR.2026.08.008 KAR Vol.51(No.4) 297-346, 2026
Abstract
This study extends prior research on the Undistributed Corporate Income Tax System (UCITS) by reassessing its validity and effectiveness. The UCITS is designed to reduce undistributed income by encouraging firms to increase qualified reinvestment expenditures. To evaluate this objective, the study analyzes the allocation of internally generated cash flow (IGCF) between qualified expenditures and retained earnings within firms. First, the study reexamines whether the UCITS appropriately targets firms with relatively high levels of retained earnings. The results indicate that, for both eligible and non-eligible firms, a larger proportion of IGCF is allocated to retained earnings than to capital investment expenditures, supporting the policy rationale for the system. However, no statistically significant difference is observed between the two groups in the pre-implementation period, suggesting that the eligibility criteria may require reconsideration. Second, a post-implementation comparison shows that eligible firms allocate a greater proportion of IGCF to qualified expenditures and a smaller proportion to retained earnings than non-eligible firms. Finally, the reinvestment effect is more pronounced among financially constrained firms. Overall, the findings suggest that the UCITS effectively promotes reinvestment and reduces retained earnings, while firm-specific financial characteristics differentially influence its impact.
