Soon Suk Yoon, June‐Bok Wee, Chang‐Hyun Baik and Gary A. Miller
We examine whether audit regulations by the Financial Supervisory Services of Korea for initial public offering (IPO) firms prevent them from managing earnings. We investigate…
Abstract
We examine whether audit regulations by the Financial Supervisory Services of Korea for initial public offering (IPO) firms prevent them from managing earnings. We investigate eighty‐three IPO firms after the introduction of the auditor designation system, which applies regulatory‐body auditor assignments, in 1995 and compared them with three control samples. We document that the auditor designation system successfully reduces the earnings management practices by IPO firms. Compared to the control samples, the IPO firms, in general, have smaller accruals, stronger correlation coefficients between cash from operations and net income, and lower ratios of sign‐changes reporting positive earnings when cash from operation is negative or vice versa. The regression analysis also reveals that the IPO sample is less prone to manage earnings. In sum, the results are consistent across different test methods in supporting the effectiveness of the auditor designation system in deterring IPO firms from taking income‐increasing strategies.
This study empirically examined how prevalent earnings management practices are among Korean firms during the period 1994 and 1997. Specifically, this study focuses on the use of…
Abstract
This study empirically examined how prevalent earnings management practices are among Korean firms during the period 1994 and 1997. Specifically, this study focuses on the use of controllable non‐operating items as tools of earnings management when they face unwanted operating performances caused by uncontrollable non‐operating items. We expect that firms with extreme operating and/or non‐operating performances will utilize controllable non‐operating real transaction accruals to offset or mitigate extreme performance.
This paper investigates the functional relationships between stock returns and two representative performance measures. The two measures are earnings and cash from operations. In…
Abstract
This paper investigates the functional relationships between stock returns and two representative performance measures. The two measures are earnings and cash from operations. In addition, this paper assesses the association of stock returns with the decomposed components of earnings. Our study documents that earnings dominate cash from operations in terms of the relationships with the stock returns. When the stock returns are regressed on the decomposed components of earnings, cash from operations consistently shows strong positive relationships with stock returns. The efficient capital market hypothesis posits that changes in reported earnings without cash flow implications should not affect stock prices. However, our regression results indicate that non‐current accruals have strong relationships with the stock returns even though they lack cash flow implications. Perhaps this may imply that cosmetic earnings increases might be rewarded with increases in stock prices.
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Political compromise between the main parties is at a three-decade low, with the DPK step being unprecedented. President Yoon Suk-yeol’s conservative People Power Party (PPP) has…
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DOI: 10.1108/OXAN-DB287842
ISSN: 2633-304X
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While several probes into insurrection charges against Yoon are under way, lack of clarity on his status and legitimacy has created a limbo that is damaging, unconstitutional…
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DOI: 10.1108/OXAN-DB291576
ISSN: 2633-304X
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Yoon won the March 9 presidential election by a tiny margin and was sworn in on May 10. He is a career prosecutor who has never held political office before. His skills and vision…
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DOI: 10.1108/OXAN-DB270523
ISSN: 2633-304X
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Meanwhile, the leader of the opposition and a ruling party lawmaker have been hospitalised after serious assaults (in the former case, politically motivated). There are also…
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DOI: 10.1108/OXAN-DB284941
ISSN: 2633-304X
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Unlike during the 1997-98 Asian financial crisis, South Korea now has strong fundamentals to confront external economic and political headwinds. However, President Yoon Suk-yeol…
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DOI: 10.1108/OXAN-DB272592
ISSN: 2633-304X
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Inflation remains a problem, though there has been a tourism surge. South Korean President Yoon Suk-yeol’s approval ratings remain low, with the opposition winning a key…
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DOI: 10.1108/OXAN-DB283403
ISSN: 2633-304X
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The day before, by one vote, the National Assembly rejected an unprecedented attempt by prosecutors to arrest the leader of the main opposition party, Lee Jae-myung, over…