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.
Changes in the Conceptual Framework for Financial Reporting and the Accounting Environment and Accounting Conservatism : An Analysis on the Time Series Trend over the Past 20 Years 재무보고를 위한 개념체계 및 회계환경의 변화와 회계보수주의 : 지난 20년간의 추세 분석
이우재 Woo Jae Lee
DOI: KAR Vol.46(No.6) 1-36, 2021
Since 2000, four revisions have been made for the conceptual framework for financial reporting. A major one which might affect the conservative accounting practice was amended in July 2011. The important feature of this amendment is the complete removal of reliability from the conceptual framework. The derecognition of reliability as one of the useful qualitative characteristics of financial reporting raised concern that it will lead to overlooking the importance of accounting conservatism in practice. Therefore, this study aims to investigate the level of accounting conservatism of listed companies around the change in conceptual framework. Contrary to ex-ante expectation, the results show that conservative accounting tended to increase over time. The results are not altered in the use of various proxies of accounting conservatism. Furthermore, the subsample tests show that the increase in the level of conservative accounting is likely due to the introduction of K-IFRS and the strengthened accounting regulation such as the application of new international audit standards, amendments to the new revenue recognition standard, the implementation of periodic auditor designation, and the adoption of standard audit hours. The results are also consistent when samples are divided by cross-sectional firm characteristics that could affect conservative accounting, such as the size of auditors and the level of comparability in financial statements. These findings provide implications for the regulators and practitioners.
재무회계 개념체계, 회계보수주의, K-IFRS, 재무제표 비교가능성, Big 4 감사인, conceptual framework, accounting conservatism, K-IFRS, accounting comparability, Big 4 auditor
Ahmad Haruna Abubakar , Noorhayati Mansor , Norhayati Abdullah
46(6) 37-65, 2021
Ownership Structure and Real Earnings Management in Nigeria : The Moderating Effect of Risk Management Committee
Ahmad Haruna Abubakar , Noorhayati Mansor , Norhayati Abdullah
DOI: KAR Vol.46(No.6) 37-65, 2021
This study examines whether the existence of a separate risk management committee can moderate the relationship between ownership structure (managerial, institutional, and foreign) on real earnings management. The data are obtained from 360 firm-year observations for five years (2015-2019). Panel Corrected Standard Error is employed to analyze the data studied. The findings show that the existence of risk management committee along with managerial ownership are likely to prevent managers from engaging in real earnings management. Additionally, despite the positive effect of institutional ownership and foreign ownership on real earnings management, the presence of risk management committee can influence institutional and foreign investors with short-term investment motives and exercise efficient monitoring and reduce the frequency of manipulating. The result give understanding to investors, regulators, and financial analyst that the moderating effect of risk management committee on the ownership structure (managerial, institutional, and foreign) would strengthen the corporate board monitoring and deter management from engaging in perpetual unethical practice such as earnings management
The Effect of Losses Avoidance and Corporate Governance on Tax Divergence 적자회피 및 기업지배구조가 현금유효세율과 GAAP 유효세율의 차이에 미치는 영향
박종일 Jongil Park , 이윤정 Yun-jeong Lee
DOI: KAR Vol.46(No.6) 67-113, 2021
This study examines whether firms manage earnings by lowering their tax expenses to avoid reporting losses, and how corporate governance moderates firms’ earnings management through tax expenses. We use tax divergence (hereafter TD), defined as the difference between a firm’s cash effective tax rate (ETR) and GAAP ETR, as a proxy of earnings management through tax expenses, and corporate governance and ESG rating from KCGS as proxies for corporate governance. Loss avoidance is defined as reporting a small positive earnings. We find positive relations between TD and loss avoidance. These relations appear to be weakened by better corporate governance, the effect of which seems to be stronger when loss avoidance is defined using a smaller interval. However, we do not observe significant relations between TD and earnings decrease avoidance in the additional analyses. Our findings suggest that firms may try to avoid reporting losses by reducing tax expenses, and that good corporate governance could help curb earnings management through tax expenses. The results of this study can shed light on the link between loss avoidance and earnings management through tax expenses, as well as the effect of corporate governance on this link. This study contributes to the current earnings management literature by providing novel empirical evidence on the use of a specific method, reduction of tax expenses, to manage earnings.
현금유효세율과 GAAP 유효세율의 차이, 법인세비용을 이용한 이익조정, 적자회피, 기업지배구조, ESG 등급, the difference between cash ETR and GAAP ETR, earnings management through tax expenses, loss avoidance, corporate governance, ESG
This study investigates ESG determinants and firm values in terms of economic policy uncertainty and operating profit volatility using the ESG score evaluated by the Korea Corporate Governance Service. First of all, we examine the effect of economic policy uncertainty on ESG activities of companies and understand the meaning of ESG activities in terms of resource constraints theory. Next, we analyze the relation between a firm's ESG activities and operating income volatility to see if the ESG activities allow the company to control its operating income volatility. Last, we examine the association between the ESG activities and firm value by dividing into those with high or low operating income volatility. From the empirical results, we find that ESG activities of companies decrease as economic policy uncertainty increases. This means that if a company face an increased in risk due to exogenous factors such as economic policy uncertainty, the company reduces expenditure on ESG activities in accordance with the resource constraint theory. We also find that companies that carry out more ESG activities can reduce their operating income volatility and ESG activities of companies with high operating profit volatility have more positive effect of improving firm value than others. The contribution of this study is that it empirically verified the effect of economic policy uncertainty on ESG activities of companies and the effect of ESG activities on operating income volatility and firm value.
A Study on the Effect of Convertible Bond with Refixing Option on the Usefulness of Accounting Information 리픽싱(Refixing) 전환사채와 회계정보 유용성
백정한 Jeong Han Baek , 곽영민 Young Min Kwak
DOI: KAR Vol.46(No.6) 141-179, 2021
The purpose of this study is to empirically verify how the issuing (and holding) convertible bonds (CB) with refixing option and the accounting choice for conversion rights in refixing-CB affect the usefulness of accounting information. To achieve the purpose of this study, we identified firms that issued refixing CB during the sample period from 2016 to 2019, while selecting firms that did not issue mezzanine bonds during same period as control groups through propensity score matching. Main results are summarized as follows. First, we found that the value relevance of net income to stock price of firms with refixing CB was lower than control samples. Furthermore, we confirmed that decline in value relevance is more pronounced in firms that issue refixing CB with call option that can designate largest shareholder and related parties as acquirers or acquisition targets. This finding suggested the possibility that refixing CB is being abused as a means of expanding the ownership of major shareholders. Second, we observed that the value relevance of firms that classified conversion rights as liabilities was lower than firms that classified conversion rights as equity or unissued control groups. It suggests that accounting choices for classification of conversion rights also cause differentiation in value relevance. Our findings suggest that the current regulations of refixing clause in CB needs to be improved and the authorities need to provide clear guidelines for the classification of conversion rights in refixing CB.
전환사채, 리픽싱 조항, 전환권, 회계선택, 회계정보 유용성, convertible bond, refixing, conversion right, accounting choice, usefulness of accounting information
Accounting Fraud Detection Using Forensic Techniques Based on Sentiment Analysis and Interpretable Machine Learning : Focused on Internal Control over Financial Reporting 텍스트 감성분석과 해석가능한 기계학습 기반의 포렌식 기법을 활용한 회계부정탐지 : 내부회계관리제도를 중심으로
This study tried to verify exploratorily whether the sentiment index of operation report of Internal Control over Financial Reporting (ICFR) has an additional contribution for developing accounting fraud detection models based on machine learning and to interpret the results. The sanction cases of Financial Supervisory Service (FSS) was used as a proxy for accounting fraud. Non-SA Set consists of comprehensive input variables, such as financial ratio and ICFR related variables (183) and SA Set is addition of the sentiment index of operation report of ICFR using Google's natural language process (NLP) API to Non-SA Set. The results of developing a total of 8 models by training 4 models on 2 each data sets are as follows. First, the logistic model based prediction model (LGST-SA) showed the highest predictive performance on SA Set. Second, the random forest model based prediction model (RF-NSA) showed the highest predictive performance on Non-SA Set. Third, the predictive performance of LGST-SA was significantly higher than that of RF-NSA, so the predictive contribution of the sentiment index was verified. Additionally, through SHAP, one of the interpretable machine learning (IML) methods, it was anecdotally confirmed that the sentiment index had a positive relationship on accounting fraud. This study has importance in that the first paper to verify the usefulness of the sentiment analysis of operation report of ICFR for developing an accounting fraud detection model and to suggest a way to overcome the limitations of the machine learning.
회계부정탐지, 감성분석, 해석가능한 기계학습, 내부회계관리제도, accounting fraud detection, sentiment analysis, interpretable machine learning, internal control over financial reporting
An Effect of Book-tax Gap, Legal Systems Difference by Countries on Earning Quality : Focusing on Book-tax Difference 회계기준과 세법, 법적 체계의 국가별 차이가 이익의 질에 미치는 영향 : 회계이익과 과세소득의 차이를 중심으로
김승준 Seung Jun Kim , 박재환 Jae Whan Park
DOI: KAR Vol.46(No.6) 219-253, 2021
This study examines the effect of BTD on earnings quality according to the Gap between the accounting standards and tax laws including how to calculate its own income. In addition, we empirically analyze the effect of BTD on the earnings quality according to legal systems including legal enforcement for the investor protection and tax evasion. The empirical results of this study are as follows. Consistent with previous studies, our study has shown that BTD and earnings quality is a negative relationship. However, the negative relationship between BTD and earnings quality was less pronounced in countries of larger gap between the accounting standards and tax law.
Furthermore, we found that the negative relationship between BTD and earnings quality was also less pronounced in countries with better legal system including legal enforcement for the investor protection and tax evasion. These results show that the relationship differs depending on each county’ legal system and gap between the accounting standards and tax law. It implys that interpretation of empirical results about the relationship between BTD and earnings quality without sufficient considering each country’s legal and institutional system has a serious limitation. This paper has a contribution to the result that the information usefulness of BTD can be differentiated according to gap between the accounting standards and tax law and legal systems.
회계이익과 과세소득의 차이(BTD), 회계기준과 세법의 차이(Gap), 법적 체계, 투자자 권리보호, 이익의 질, book-tax difference, gap between the accounting standards and tax laws, legal system, investor protection, earnings quality
The Effect of Company Characteristics on Relationship between Overinvestment and Future Earnings Response Coefficient : Board of Director, Audit Committee and Manager’s Characteristics 기업의 특성이 과잉투자와 미래이익반응계수간의 관계에 미치는 영향 : 사외이사, 감사위원회, 경영자의 특성을 중심으로
김도연 Do Youn Kim , 김정옥 Jeong Ok Kim
DOI: KAR Vol.46(No.6) 255-296, 2021
Although the results suggest that corporate investment leads to high performance, studies have shown that overinvested companies can negatively affect future performance in the long run as their profitability deteriorates and they bear excessive cash flows. This is because the investment activities of the entity are carried out not for the purpose of making an investment decision for the value of the entity but for the purpose of pursuing the management's own private interests. Kim and Kim(2021) suggest that overinvestment activities were for the benefit of individual managers rather than for the purpose of improving corporate value, and that stock prices did not reflect information on future earnings. Therefore, this study examines whether the market's interpretation of an entity's overinvestment depends on the outside directors, the audit committee, and the manager's characteristics, which are known to be able to efficiently control management's private profit-seeking. This is because companies with outside directors and audit committees can efficiently control management's private profit-seeking activities, and the quality of accounting information is different and future management performance is different. This study empirically examines the effect of company characteristics on relationship between overinvestmnet and future earnings response coefficient. our research results as follows. Future earnings response coefficient of the company with that have an outside director or an audit committee, or owner manager, or longer manager’s term, or superior manager ability is relatively higher than otherwise. These results imply that investors cannot reasonably predict the future profits of overinvest-companies, but that overinvestment in companies with stronger governance was aimed at increasing long-term corporate value by efficiently controlling managers' pursuit of private interests. The contribution of this study was that rather than simply examining investors' reactions to overinvestment, it was necessary to consider the characteristics of companies, the outside director, audit committee, and managers that can efficiently monitor and control opportunistic behavior of managers.
사외이사제도, 감사위원회, 경영자의 특성, 과잉투자, 미래이익반응계수, board of director characteristics, audit committee characteristics, manager characteristics, overinvestment, future earnings response coefficient
Korean Accounting Review
Address: 911, Metrodiovil, Baekbeom-ro 199, Mapo-gu, Seoul, Republic of Korea [Zipcode: 04195]