• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.9
• /
• pp.189-199
• /
• 2021

This study attempts to examine the relationship between corporate social responsibility (CSR) disclosure and earnings management practices in the context of Saudi Arabia after mandatory IFRS adoption. It is carried out on an unbalanced panel of 277 observations over the period 2017-2019. For this purpose, CSR disclosure is measured by Bloomberg ESG scores, while the residuals from the modified Jones model are considered for earnings management. As control variables, we have retained the firm performance, market-to-book ratio, firm size, financial leverage, board independence, ownership concentration, managerial ownership, and lagged discretionary accruals. Using the system GMM estimator in the dynamic panel, the results show a positive association between CSR disclosure and earnings management practices, thus supporting the perspective of agency theory. Managers engage in socially responsible activities beforehand to conceal their wrongdoing and convince stakeholders that the organization is transparent. They probably use ethical codes as a tool to achieve their own goals rather than the firm's goals. Our contribution is the use of recent data (2017-2019) taking into account the mandatory adoption of IFRS in Saudi Arabia. Additionally, to our knowledge, this study is the first to address CSR disclosure and earnings management practices using GMM system estimates.

• Asia-Pacific Journal of Business
• /
• v.12 no.3
• /
• pp.193-212
• /
• 2021

Purpose - This study investigates the effect of auditor change on client firm's accounting (financial statement) comparability. Design/methodology/approach - The comparability of accounting information is measured by the difference in accruals between the two firms. Additionally, the study uses earnings-stock return relationship as another proxy of accounting comparability. In particular, the paper examines whether there is a systematic difference between initial audit years and the other years with respect to the client firm's accounting comparability. Moreover, current study tests how changes in auditor size or industry expertise before and after the switch of auditors affect the accounting comparability. Findings - The results show that the level of accounting comparability is lower in the year of auditor change than in the other years. Furthermore, this lower level of comparability is derived by the observations that switch their auditors from non-Big4 to non-Big4 or from non-specialist to non-specialist. These results are consistent when accounting comparability is measured by different proxies. Research implications or Originality - The findings of this study provide important policy implications for the regulations related with auditor selection.

• Journal of Distribution Science
• /
• v.20 no.4
• /
• pp.95-100
• /
• 2022

Purpose: This study aimed to investigate whether distribution and service companies maintained their accounting information quality and provided reliable information despite the economic changes occurring after the outbreak of the COVID-19 pandemic in Korea. The distribution industry has enjoyed increased demand as many companies expanded their untact distribution channels, including to online sales. However, as the pandemic drags on, their future prospects remain uncertain. Research design, data, and methodology: In this study, we define 2018-2019 as the "pre COVID-19 period" and 2020 as the "post COVID-19 period." An empirical analysis was performed using a regression model that includes POST, the independent variable, indicating the post COVID-19 period, and discretionary accruals(DA), a proxy for earnings management, as a dependent variable. Results: The analysis shows that the coefficient of POST is significantly positive (+) for the dependent variable DA. This finding suggests that distribution and service companies engaged in more earnings management during the post COVID-19 period than during the pre COVID-19 period, indicating their awareness of the uncertainty of future business performance as the pandemic persists. An additional analysis confirmed that smaller companies with fewer stakeholders and higher information asymmetry tend to engage more in earnings management than larger companies.

• The Journal of Economics, Marketing and Management
• /
• v.4 no.4
• /
• pp.17-24
• /
• 2016

The purpose of the present study is to investigate the relationship between Management bonuses and earnings stability of the listed companies on the Tehran Stock Exchange (TSE). The population includes 94 firms selected through systematic sampling. The data is collected from the audited financial statements of the firms provided by TSE's website from 2009 to 2016. The results of multiple linear regression analysis show that there is a significant relationship between Management bonuses and earnings stability. The aim of this study primarily investigating the relationship between earnings stability and management bonus. In the case of this target, the next goal of this research is to develop a proposal for legislation in the domain of capital market, students and faculty as well as accounting information users provide research interests. Observations show many companies despite the decline in profitability, bonus managers to continually pay. Increase in listed companies Stock Exchange as well as the importance of communication between earnings quality and bonus managers in Financial Accounting the authors created an incentive to research about this relationship do. The results of this research could be the development of literature done in the past. Thus, more knowledge about the issue of sustainability and its relation to bonus managers the users of accounting information, accounting courses provide students and faculty.

• Journal of Digital Convergence
• /
• v.18 no.6
• /
• pp.237-244
• /
• 2020

The purpose of this study is to empirically analyze the effect of information related to the largest shareholder's change on the likelihood of reporting a loss for firms listed on the Korea Exchange. Specifically, this study conducts a logit regression analysis to examine the firm's loss reporting with frequent changes in the largest shareholder among the largest shareholder change types. So, it controls the impact of a firm's loss reporting, such as the previous year's loss reporting and discretionary accruals. As a result of the analysis, firms whose largest shareholder have changed more than 2 times in the accounting period are found to have higher firm risk in loss reporting than other firms. The results of this analysis confirm that frequent changes in the largest shareholder, which are disclosures of investment risks on the Korea Exchange, may result in investment risk situations such as loss reporting.

• Journal of Digital Convergence
• /
• v.15 no.11
• /
• pp.167-174
• /
• 2017

These days, people distrust the accounting transparency of firms in Korea. It can .increase the capital costs and reduce profitability of firms. Auditors say that one of causes on the low grades of the accounting transparency is free contracts between auditors and firms. Firms want auditors take low audit fees. In principle, if auditors take low audit fees, they cannot input auditor resources to proper audit. However, there are not any empirical evidence about the relation between the audit fees dumping and the audit quality. This study defines dumping auditors if their audit fees are lower than the average of industries, and examines whether these auditors showed low audit qualities or not. As a result, firms which are audited by dumping auditors presented low abnormal accruals. We can interpret this result as that dumping auditors have low audit qualities. This result helps to make policies to improve the accounting transparency of firms.

• Journal of Distribution Science
• /
• v.18 no.2
• /
• pp.99-108
• /
• 2020

Purpose: This paper investigated the relationship between market competition and firm valuation error. Furthermore, Additional analyses were made according to the quality of financial reports and the listed market. Through the process we confirm to the impact of competition on the capital market. The purpose of this study is to analyze the impact of competition on valuation errors. The preceding studies did not provide a consistent results of the effects of competing functions on the capital market. One view is that the competition could mitigate the information asymmetry, and the other is that monopolistic lessens the manager's involvement in financial reporting. This study is intended to expand the prior study by analyzing the impact of competition on the capital market and on the valuation of investors. Research design, data, and methodology: The analysis was conducted on 12,031 samples over 11 years from 2008 to 2018 using data from market in Korea. Here the valuation error was measured by the research methodology of Rhodes-Kropf, Robinson and Viswanathan (2005), and competition measured by Herfindahl-Hirschman Index multiplied by (-1), and Concentration Ratio by (-1). Results: We confirm that the positive relationship between competition and the valuation error. In addition, we also found that the positive relation between competition and valuation error was in cases of low discretionary accruals and the KOSDAQ market. This means that the net function of competition does not mitigate valuation errors. Conclusions. This study has the following contributions when compared to prior research. First, the relevance between the level of competition and the valuation of the entity was confirmed. The study by Haw, Hu and Lee (2015) suggested that monopolistic industry of analysts' forecast is more accurate due to lower the variability in earnings. This study magnified it to confirm that monopolistic lessen information uncertainty in valuation. Second, the study on valuation errors was expanded. While the study on the effect of valuation errors on the capital market is generally relatively active, it is different that competition degree has analyzed the effect on valuation errors amid the lack of research on the effect on valuation errors.

• The Journal of Industrial Distribution & Business
• /
• v.11 no.4
• /
• pp.39-46
• /
• 2020

Purpose: This study looks at the relevance between discretionary revenue and book-tax differences (hereafter BTDs). While the study of earnings management, which focused on discretionary accruals and real earnings management, has largely made, it has not yet been actively researched on discretionary revenues. Therefore, it was believed that discretionary revenue would expand the preceding study by looking at its relevance to BTD, known as financial reporting quality and measures of tax avoidance. In general, prior research suggested that earnings management make BTDs larger. Thus, the relationship between discretionary revenue and the amount of BTD is predicted positive. Research design, data and methodology: To this end, the method of discretionary revenues was used and BTDs measured in four ways. First, Earnings before income tax - estimated taxable income divided by total asset (BTD). Second is fractional rank variable of BTDs (FBTD). Third is Indicator variable equals 1 if the firm-year has a positive BTD, 0 otherwise (PBTD). Fourth is that Indicator variable equals 1 if the firm-year has a BTDs in top(bottom) quartile, 0 otherwise (LPBTD, LNBTD). 4,251 samples were analyzed in the Korean Security market (KOSPI) from 2003 to 2014. Results Empirical analysis shows that BTDs increases as discretionary revenue increases. These results were equally observed when BTDs was measured as a ranking variable or as a indicating variable. These results indicate that earnings management through the revenue of managers exacerbate the quality of financial reporting. Conclusions: In sum, discretionary revenues can be used as an indicator of making BTDs larger and meaningful as the first study of the Korean capital market where discretionary revenues affect accounting information quality. Investors need to increase interest in discretionary revenues because intervention in financial reporting through revenue accounts by managers can increase information asymmetry and agency costs. This means that studies on discretionary revenues that have been relatively small should be expanded. The results also provide important implications for the relevant authorities and investors. Despite these benefits, however, measurement error problems with estimates still appear as limited points, and prudent interpretations are required, and additional follow-up studies are needed in that variables that are not yet considered in this study may affect our findings.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.19 no.9
• /
• pp.100-107
• /
• 2018

This study investigated the effect of corporate international diversification on cost stickiness. A cost behavior that indicates a lower rate of cost reduction when the volume of sales decreases than the rate of cost increase when the volume of sales is increased is called cost stickiness. This cost behavior is caused by decisions made by considering the adjusting costs of the manager, and for corporate international diversification, the decision making on the adjustment cost of the manager has been reduced by the offsetting accruals hypothesis. From the empirical results, we observed that the cost stickiness of international diversified companies decreases. It is expected to contribute to the capital market and academia by identifying whether corporate international diversification can have a significant impact on management decision making related to costs.

• Journal of Digital Convergence
• /
• v.14 no.12
• /
• pp.111-120
• /
• 2016

PCAOB conducts the direct supervision for the PCAOB registered accounting firm. Therefore, if an accounting firm is registered with the PCAOB, it will thoroughly manage for their quality management systems. The registered auditor can be expected to have better quality of the audit. This study carried out the analysis using the audit fee which proxies for audit quality. The results of analysis are as follows. After controlling for foreign accounting firms affiliated status, company size, risky assets, leverage, ROA, and market-related variables, PCAOB is a significant explanatory variable for the audit fees. The results of this study support the hypothesis that PCAOB-registered auditors will provide a good audit quality.