The effect of accounting accruals on the market reaction to a stock split: A comparison between pure and opportunistic stock splits

( Kyung Soon Kim ),( Jin Hwon Lee ),( Seun Young Park ) 한국회계학회 2015 회계학연구 Vol.40 No.4

Using stock splits from 2000 through 2012 in the Korean stock market, this paper examines whether managers use accounting accruals to signal private information and the discretionary component of accruals is a useful proxy for the firm``s information risk. Louis and Robinson(2005) find that managers report significantly positive discretionary accruals prior to stock split and that the market positively prices the pre-split abnormal accruals at the split announcement data, suggesting that the market construes the pre-split abnormal accrual as a signal of managerial optimism. Based on their study, we investigate whether discretionary accruals can be used as tools to reveal private information in the Korean stock market by analyzing the association between the market reaction of stock split and the pre-split discretionary accruals. In addition, Kim et al.(2012) suggest that splitters with subsequent corporate events may have more opportunistic motives to maximize the effects of other corporate events. Consistent with their study, we also analyse whether the accruals quality is an effective proxy for information risk of firms that split stocks as a manipulation tool. Based on our analysis, we find no evidence that discretionary accruals are correlated with the market returns of all the firms that split stocks with and without subsequent corporate events. This result implies that the Korean stock market may perceive the abnormal accruals more as a manager``s opportunistic behavior rather than as a means of signaling favorable private information conveyed by manager. On the other hand, only among the firms that split stocks with subsequent corporate events, the positive market reaction to a stock split announcement is decreased for firms that have higher volatility of the abnormal accruals (i.e., low accruals quality) before the split. Specifically, we estimate the innate and discretionary components of accruals quality as suggested in Francis et al.(2005) and examine the effect of the opportunistic stock split (namely, splitters followed by other corporate events) on the abnormal returns depending on the innate and discretionary accruals quality separately. The result shows that it is the discretionary accruals quality that is related to information risk. Interestingly, such association between market reaction of opportunistic stock split and pre-split discretionary accruals quality is mainly observed in optimistic market environment. This paper is meaningful in a sense that we shed light on the association between discretionary accruals(or discretionary accruals quality) and the market response by using stock split in emerging markets such as that in Korea.

재량발생액과 통제변수; CFO와 ROA의 영향을 중심으로

이장건 ( Jang-gun Lee ) 한국회계학회 2016 회계저널 Vol.25 No.4

Discretionary accruals are often used as a measure to analyze the phenomenon of earnings management in the accounting field. Also sometimes they are used as a measure of accounting transparency and audit quality. Like this, discretion accruals play an important role in the accounting studies. Nevertheless, it is difficult to find a literature research on discretionary accruals in Korea. Therefore, the first purpose of this study is to review the literature on discretionary accrual researches in Korea. Especially, this study focuses on the control variables that are frequently used in the discretion accrual studies. This study reviewed 58 domestic previous researches that designed the regression model of the discretionary accruals as dependent variable. According to the literature review, the debt ratio and firm size was the most commonly used as control variables. Previous studies mainly used loss dummy variable if net income is negative, previous accruals, firm size, debt ratio, the ration of the largest shareholder ownership, the ratio of the foreign ownership, growth opportunities and big4 dummy variable if audit firm is big4 as the control variables. According to the general theory, loss dummy variable, previous accruals, the ratio of the foreign ownership, big4 dummy variable are expected to affect discretionary accruals negatively. But, 50% of the loss dummy variable, 30.5% of the previous accruals, 8.2% of the ratio of the foreign ownership and 14% of the big4 dummy variable affected discretionary accruals negatively in the review of the literature researches of this study. Also, according to the general theory, debt ratio and growth opportunities are expected to affect discretionary accruals positively. But, 17.7% of the debt ratio and 43.1% of the growth opportunities affected discretionary accruals positively in the review of the literature researches of this study. In other words, the general theory has shown a significant difference with the empirical results. Therefore, the second purpose of this study was to find the reason of the difference between the general theory and the empirical results. This study tries to find the reason of the difference in the relationship of [earnings . cash flows from operations = total accruals]. Because discretionary accruals estimating model like modified Jones model(Dechow et al. 1995) have low R2, much portions of the total accruals remain the discretionary accruals. So, earnings and cash flows from operations can effect discretionary accruals like total accruals. Eventually, we can infer that control variables like loss dummy variables, previous accruals, firm size, debt ratio, the ration of the largest shareholder ownership, the ratio of the foreign ownership, growth opportunities and big4 dummy variable would surrogate earnings and cash flows from operations to affect discretionary accruals. For empirical tests, this study investigates if the regression model of discretionary accruals as dependent variables excludes cash flows from operations or earnings as independent variables, cash flows from operations or earnings are proxied by other control variables like loss dummy variables, previous accruals, firm size, debt ratio, the ration of the largest shareholder ownership, the ratio of the foreign ownership, growth opportunities and big4 dummy variable. Discretionary accruals were estimated using the cross-sectional modified Jones model(Dechow et al. 1995), ROA model(Kothari et al. 2005) and CFO model(Rees et al. 1996). The sample consisted of 6,061 firm-year samples in KOSPI and 5,437 firm-year samples in KOSDAQ from 1995 to 2013. This study can be summarized as follows: First, when the regression model of discretionary accruals as dependent variables excludes cash flows from operations as independent variables, cash flows from operations are proxied by control variables. Second, when regression model of discretionary accruals as dependent variables excludes earnings as independent variables, earnings are proxied by control variables. Like the suggestion of this study, control variables have shown systematic changes in regression coefficient sign to surrogate cash flows from operations or earnings. This means that it is doubtful that control variables that used on the basis of earnings management incentives are to control the earnings management incentives. The results of this study might provide the starting point of the discussion of whether it is reasonable to use the cash flows from operations or earnings as independent variables in the regression model of the discretionary accruals, whether it is reasonable to use the cash flows from operations or earnings as independent variables to estimate the discretionary accruals. In addition, the survey of the Graham et al.(2005) that CEO manages earnings by using discretionary expense like research and development expense and advertising expense can be the evidence that academic researches of the earnings management(i.e. discretionary accruals) differ from practices.

이익 조정 여부에 따른 발생액 이상 현상의 차이

김지홍 ( Jee Hong Kim ),고재민 ( Jai Min Goh ),김상일 ( Sang Il Kim ) 한국회계학회 2008 회계학연구 Vol.33 No.3

Researchers have opposite perspectives for discretionary accrual. Some support its positive aspect in that it can deliver managers` private information for future performance, having a signalling effect. On the contrary, others doubt it since it reflect managers` opportunistic earnings management. It has been the most popular metric measuring earnings management in a lot of earnings management study. Thus, discretionary accrual is still controversial among researchers. Specifically, some have a positive eye on discretionary accrual due to its additional explanation on earnings persistence, while others a negative eye because of its relatively lower explanation power than cash flow or non-discretionary accrual. In addition, some justify information content of discretionary accrual in that it explains stock returns significantly, while others belittle since the capital market overvalues it due to unawareness of earnings management. These differential perspectives are caused by earnings management. Chan et al. (2006) argued that discretionary accrual can be a leading indicator of future business if only manager does not manage earnings. Therefore, the objective of this study is to examine whether there is a difference between earnings managed firms and non-earnings managed firms after classifying earnings managed firms. Earnings management has not been clearly considered in prior studies, because they treated all firms into one portfolio. But in order to synthesize different opinions that seem to be contradictory, we attempt to divide all firms into two groups, earnings managed firms and non-earnings managed firms. After that, we investigate whether earnings persistence and market reaction are different in each group. If difference is found, we can show that discretionary accrual carries managers` private information in non-earnings managed firms, while it indicates managers` opportunistic activity in earnings managed firms. These synthetic study is carried out in two aspect, earnings persistence and market reaction. First, discretionary accrual with earnings managed firms would be able to explain future earnings relatively less, while it can account for future earnings better in non-earnings managed firms. Second, we try to investigate how the capital market evaluates each earnings persistence in two groups. Prior empirical studies have shown that market participants do not catch that the accrual is less accountable for earnings persistence than cash flow. Accruals anomaly is such a phenomenon that the stock market overvalues accrual related to earnings persistence. Studies examining accruals anomaly attributed it to market inefficiency for earnings management and functional fixation is widely regarded as a hidden driver of market mispricing. Similarly, if market cannot recognize earnings management, accruals anomaly in earnings managed firms would be bigger than in non-earnings managed firms. But if market is efficient enough, it can identify earnings managed firms and there are no accruals anomaly or it would be much smaller in earnings managed firms. This can enable us to test market inefficiency for earnings management which has been ascribed to accruals anomaly. Empirical results indicate three findings. First, accruals anomaly for total accrual and discretionary accrual is consistent with prior studies. Market overvalues earnings persistence of total accrual, non-discretionary accrual, and discretionary accrual. But Korean stock market differs from US in that undervaluing for cash flow is not significant. Second, non-earnings managed firms show more strong earnings persistence. And this is significant for both total accrual and discretionary accrual. Third, accruals anomaly exists only for non-earnings managed firms. That is, non-earnings managed firms drive market mispricing and the market has an insight into earnings management. We can synthesize opposite perspectives of prior studies through these results. First, the higher earnings persistence in non-earnings managed firms implies that its discretionary accrual has managers` private information. However, the lower earnings persistence in earnings managed firms indicates that managers abuse it to exaggerate their performance. Second, discretionary accrual in earnings managed firms cannot account for stock returns, while that in non-earnings managed firms is associated significantly. This means that market can recognize the meaning of discretionary accrual whether it is the result of earnings management. Third, a lot of researchers have conjectured that market imperfection or functional fixation is responsible for accruals anomaly. But these results are inconsistent with prior studies in that the accruals anomaly is not caused by earnings management. Therefore, we suggest that researchers should be more careful in asserting that market inefficiency for earnings management is the main cause for accruals anomaly.

회계이익 구성요소의 추가적 정보가치가 주식수익률에 미치는 영향

신현대,Shin, Hyun-Dai 한국정보기술전략혁신학회 2004 情報學硏究 Vol.7 No.3

This study examines the relation between accruals components of earnings and stock return. Earnings are decomposed into four components: discretionary accruals, nondiscretionary accruals, nondiscretionary income and cash flow from operations. Because reported earnings in financial statement consist of cash flow from operations plus total accruals. We decompose total accruals into a discretionary accruals and a nondiscretionary accruals separately. This paper examines the incremental informational content of discretionary accruals and nondiscretionary accruals components of net income by regressing return on earnings' components in multivariate models. The empirical analysis is conducted on a sample of 1,580 firm-years comprising 158 firms during 1991-2003. discretionary accruals are obtained by decomposing total accruals into discretionary and nondiscretionary accruals conponents, using a pooled variation of the Jones model(1991). These findings suggest that the discretionary accruals(measured using a variation the Jones model) is priced by the stock market. Specifically, the discretionary accruals and cash flow from operations are positively associated with the stock return, and also nondiscretionary income, discretionary accruals are positively associated with the stock return. While this result is consistent with the market prices the discretionary accruals because it captures value-relevant information. Additional test report evidence consistent with nondiscretionary accruals conveying information about the stock return.

도산위험과 재량적 발생액이 미래 현금흐름 및 주가수익률의 관련성에 미치는 영향

심상규 한국회계정보학회 2014 회계정보연구 Vol.32 No.4

Managerial discretion could enhance earnings' informativeness by allowing communication of private information. On the other hands, managers manage income opportunistically and creating distortions in reported earnings. Therefore, the quality of discretionary accruals depends on the enticements of management's discretionary accounting choice. Prior study documents that discretionary accruals, on average, incremental information content on future cash flows and stock returns. Nevertheless, the firms with higher bankruptcy risk may have the strong incentives to choice opportunistic accounting because they face on financial distress such as the rise of cost by debt contract violation and the falling of stock price. A consequence of this is that discretionary accruals of the firms with higher bankruptcy risk may not map into realized future cash flows and weaken the information content on stock returns. This study investigates whether the bankruptcy risk weaken the association of discretionary accruals to one-year ahead cash flows and stock returns. The sample consists of 5,812 firm-year observations based on firms listed in the Korea Stock Exchange from 2000 to 2010. The estimation of discretionary accruals follows the approach used in studies by Peasnell, Pope and Young(2005). They use a cross-sectional version of modified Jones model and focus on working capital accruals rather than total accruals. The bankruptcy risk measure is calculated by the model which has reestimated the bankruptcy probability model estimated by prior study. The results of this study can be summarized as follows: First, I finds a significant negative association between interactive variable of bankruptcy risk with discretionary accruals and one-year ahead operating cash flows. As a robustness test, this study also examines the effect of bankruptcy risk on the association between discretionary accruals and one-year ahead operating cash flows by dividing the total sample into firms with high and low bankruptcy risk. The coefficient of discretionary accruals for the ninth risk decile are bigger and that for the lowest risk decile are smaller than for overall sample. This result means that the explanatory power of discretionary accruals for future cash flow is a declining function of bankruptcy risk. Second, this study finds a insignificant negative association between interactive variable of bankruptcy risk with discretionary accruals and stock return. In additional analysis of bankruptcy risk level, The coefficient of discretionary accruals for the second risk decile is significant positive and that for the other risk decile is insignificant positive. This shows that investors do not efficiently incorporate bankruptcy risk in the pricing of discretionary accruals. 본 논문은 한국거래소 상장기업을 대상으로 기업의 도산위험이 재량적 발생액과 미래 현금흐름 또는 주가수익률의 관련성에 영향을 미치는지를 검증하였다. 이를 위하여, 재량적 발생액은 수정 Jones모형을 이용하되 총 발생액 대신 운전자본 발생액을 사용하여 추정하고, 기업의 도산위험은 전성빈과 김영일(2001)이 제시한 도산예측모형에 대해 연구기간 자료를 사용하여 재추정한 모형으로 측정하였다. 표본기업은 2000년부터 2010년까지 일정요건을 충족하는 5,812개(기업/연)를 대상으로 하였다. 본 연구는 도산위험이 높은 기업의 경우 부실징후와 감리지적 등 불리한 정보를 숨기기 위해 인위적인 이익조정의 가능성이 높아 그들이 계상한 재량적 발생액은 정보가치가 감소하게 된다. 따라서 기업의 도산위험이 높을수록 재량적 발생액과 미래 현금흐름 또는 주가수익률의 관련성은 감소할 것으로 예상하였다. 실증분석 결과는 다음과 같다. 첫째, 미래 현금흐름에 대해 재량적 발생액은 양(+)의 관계를 보였지만 도산위험과 재량적 발생액의 상호작용변수는 음(-)의 관계를 나타냈다. 이는 재량적 발생액이 미래 현금흐름과 밀접한 관계를 갖지만 도산위험이 높은 기업의 경우 경영자의 기회주의적 회계선택으로 인해 재량적 발생액은 미래 현금흐름과의 관련성이 감소함을 의미한다. 둘째, 주가수익률에 대해 재량적 발생액은 양(+)의 관계를 나타냈으나 도산위험과 재량적 발생액의 상호작용변수는 유의한 관련성이 발견되지 않았다. 이 결과는 투자자들이 재량적 발생액을 의사결정에서 긍정적인 정보로 평가하지만 그 과정에서 도산위험을 합리적으로 반영하지 않고 있음을 의미하는 것이다. 즉, 우리나라 주식시장 투자자들은 기업의 도산위험이 재량적 발생액의 정보유용성을 감소시키는 요인임에도 불구하고 그것을 효과적으로 반영하지 않는다는 사실을 발견하였다.

재량적 회계처리방법 선택과 CEO 현금보상

박재영,이동녕 한국회계정보학회 2009 회계정보연구 Vol.27 No.1

For firms which registered in Korea Exchange, this study:(1) examines the effect of discretionary accruals on CEO compensation, where discretionary accruals are substitutes for the total effect of accounting choices on income;(2) investigates if accounting choices have an effect on compensation by testing the relation among compensation, accounting income before discretionary accruals and discretionary accruals;and (3) also investigates if the level of discretionary accruals is related with the incentives presented by compensation plans. The results show that positive discretionary accruals increase CEO compensation by the use of management's opportunism, while negative discretionary accruals decrease cash compensation. Also, the results show the effect of positive discretionary accruals on compensation varies with the three circumstances of the firm. This study has shown:(1) significantly increased explanatory power from decomposing income into its three components;(2) the coefficient on non-discretionary accruals is greater than the coefficient on discretionary accruals, but less than that on cash flow from operations;(3) the coefficient on positive discretionary accruals is greater than the coefficient on negative discretionary accruals;and (4) the coefficient on both positive and negative discretionary accruals varies with the circumstances of the firm. Additionally, this study shows that the relationship between compensation and reported income generally increases with the level of discretionary accruals. 본 연구는 증권선물거래소에 상장되어 있는 거래소 기업을 대상으로 하여 첫째, 이익에 대한 회계선택의 누적적 효과에 대용치로 재량적 발생액을 사용하여 경영자보상에 대한 재량적 회계선택의 누적적 효과를 검증하고자 하였고, 둘째, 재량적 발생 전의 이익, 재량적 발생, 그리고 경영자보상간의 관련성을 조사하여 재량적 회계선택이 경영자보상에 영향을 미치는지를 분석하고자 하였으며, 셋째, 재량적 발생액의 수준이 보상계획에 의해 제공되는 인센티브와 관련되어 있는지를 조사하고자 하였다. 분석결과, 경영자가 양(+)의 재량적 발생액을 기회주의적으로 이용하여 경영자 자신의 보상을 증가시킬 수 있다는 것을 검증하였고, 반면에 음(-)의 재량적 발생액은 보상과 낮은 효과를 가지는 것으로 나타났다. 또한, 세 가지 기업 상황에 따라 재량적 발생액과 최고경영자 현금보상에 대한 양(+)의 재량적 발생효과는 재량적 발생액이 최고경영자 현금보상의 증가와 관련이 있었다. 본 연구는 (1) 이익을 세 가지 요소로 분해함으로써 설명력을 크게 증가시키고, (2) 비재량적 발생액의 회귀계수는 재량적 발생액의 회귀계수보다는 크지만, 영업활동으로 인한 현금흐름의 회귀계수보다는 작으며, (3) 양(+)의 재량적 발생액에 대한 회귀계수는 음(-)의 재량적 발생액에 대한 회귀계수보다 크며, (4) 양(+)과 음(-)의 재량적 발생액에 대한 회귀계수는 기업의 상황에 따라 다양하다는 것을 나타내고 있다. 부수적으로, 최고경영자 현금보상과 보고된 회계이익의 관계는 재량적 발생액 수준에 따라 증가된다는 것을 검증하였다.

저품질의 회계이익이 비교가능할 수 있는가? 재량적발생액과 비교가능성의 관계 분석

최승욱 한국공인회계사회 2018 회계·세무와 감사 연구 Vol.60 No.2

선행연구는 높은 품질의 회계정보를 낮은 재량적발생액으로 대용한다. 비교가능한 이익이 고품질의 회계정보라면, 이러한 이익은 낮은 재량적발생액과 양의 관련이 있어야 할 것이다. 본 연구는 이러한 암묵적인 추론이 실증적으로 나타나는지에 대한 질문에서 시작한다. 면밀히 살펴보면, 둘 사이의 관계가 실제로 어떻게 나타날지 명확하지 않다. 만약 동일한 경제적 사건에 대해 유사한 크기의 재량적발생액을 인식하는 두 기업이라면 그 정의상 비교가능성이 높아질 것이다. 재량적발생액의 크기가 유사하다는 것은 두 기업이 특정 경제적 사건을 모두 높거나 낮은 수준의 재량적발생액으로 보고하였을 경우에 해당된다. 예를 들어, 두 기업 모두 매우 높은 수준의 재량적발생액을 보고하였다면, 비교가능성은 높아지지만 발생액의 품질은 낮아질 것이다. 즉, 비교가능성과 발생액의 품질이 서로 반대 방향으로 연관된다. 이러한 이유에서 비교가능성을 기존 회계품질과 동질적으로 인지하는데 어려움이 있다. 본 연구의 목적은 비교가능성과 회계품질의 대용치로서의 재량적발생액과의 관계를 실증조사 하는데 있다. 본 연구의 실증결과는 다음과 같다. 우선, 두 기업 간 재량적발생액 차이의 절대값이 작을수록 비교가능성이 높았다. 이는 서로 유사한 수준의 재량적발생액을 보고하는 기업 사이의 재무제표 비교가능성이 높음을 의미한다. 다음으로 이러한 재량적발생액의 차이를 세분하였다. 즉, (i) 두 기업 모두 0에 가까운 재량적발생액을 보고하여 높은 회계품질을 보고한 기업과, (ii) 두 기업이 모두 상향이익조정한 경우, (iii) 모두 하향이익조정한 경우를 구분하였다. 두 기업 간 재량적발생액의 차이가 큰 통제그룹과 비교하였을 때, 고품질 기업-쌍 (i)은 비교가능성이 유의하게 높았으며, 상향이익조정 기업-쌍 (ii)는 통제그룹과 비교가능성의 차이가 없었다. 반면, 하향이익조정 기업-쌍 (iii)은 통제그룹 및 (i), (ii)와 비교해 비교가능성이 유의하게 낮았다. 비교가능성 수준의 통계적 비교 결과, 고품질의 회계이익을 보고한 (i)의 기업-쌍이 가장 높은 비교가능성을 보였으며, (ii)와 (iii)의 순서를 보였다. 보다 흥미로운 발견은, 총발생액을 이용하여 측정한 경우 (i)의 고품질 기업-쌍 및 (ii)의 상향이익조정 기업-쌍도 비교가능성이 높았고, (iii)의 하향이익조정 기업-쌍만 비교가능성이 낮았다. 또한 총발생이나 재량적발생액 대신 성과대응재량적발생액을 이용한 경우 (i)의 고품질 기업-쌍은 여전히 비교가능성이 높았으나, (ii)와 (iii)의 저품질 기업-쌍은 모두 비교가능성이 낮았다. 이는 결국 재무제표 비교가능성은 발생액의 수준 자체보다는 이에 포함된 재량적발생액의 비중과 밀접한 관련이 있다는 것으로 해석된다. 또한 보다 정교한 측정치로 회계품질을 대용하면, 저품질의 회계이익은 상향 및 하향에 무관하게 비교가능하지 않음을 시사한다. 또한 경영자의 재량적 선택이 반영되지 않은 불가피한 발생액은 재량적발생액에 비해 상대적으로 재무제표 비교가능성을 제고하는 효과가 있는 것으로도 해석된다. 본 연구의 공헌점은 다음과 같다. 첫째, 비교가능성과 기타 회계품질 대용치간 관계를 비교한 연구는 거의 없으며 본 연구는 (재량적)발생액과 비교가능성의 관계를 제시하고 있다. 둘째, 추가분석으로 국제회계기준 도입 효과를 검증하였으며 본 연구의 결과는 도입 전과 ... If financial statements comparability is high a quality accounting information, it should be closely related to the other earnings quality proxies. For instance, since lower discretionary accruals are considered as a high quality earnings, comparable earnings are assumed to be positively associated with lower discretionary accruals. However, if both firm report higher level of discretionary accruals, the differences between those firms’ discretionary accruals are small thus their reported earnings are comparable. This implies that even though the two firms report higher discretionary accruals, their earnings could be comparable. Therefore, it is meaningful to investigate this contradictory prediction in empirical setting. This study hypothesizes and tests these arguments. The results show that the absolute value of discretionary accruals differences between the two firms are negatively related with comparability. Next, I divide the sample into (i) high quality earnings group, (ii) income increasing, and (iii) income decreasing group by discretionary accruals with differences between i-j firm pairs. Compared with a control group with a large difference in discretionary accruals between the two firms, the high-quality firm-pair (i.e., high quality earnings group) is highly comparable, however, the income increasing firm-pair are not differ from the control group. Furthermore, the income decreasing firm-pair shows significantly lower comparability than the control group. Comparing the levels of comparability, the firm-pairs of (i) which report high quality accounting earnings show the highest comparability, and (ii), (iii) followed next. In additional tests, the results are qualitatively similar when I use performance-matched discretionary accruals. Also, I find consistent result in both pre- and post-IFRS period. The results are consistent in the use of lead-lag regression. In summary, these empirical evidences suggest that if the proportion of discretionary accruals are relatively higher among total accruals, the likelihood of comparability is likely to decrease. In other words, the comparability of firms who upward their earnings by discretionary accruals is low. Thus, comparability may be high even in some cases, which is considered as a low quality accounting information in previous studies. This implies that the proportion of discretionary accruals included in the accruals other than the level of accruals itself is more closely related to the financial statements comparability. This paper contributes to the existing literature in several ways. First, even though there are various set of proxies of accounting quality, few studies investigate financial statement comparability with these accounting quality proxies. By extending these research stream, this study suggests the systematic relationship between accruals and comparability. Second, this study shows that the comparability of accounting information can be changed according to the manager 's choice of accounting alternatives. Finally, the evidence of this paper helps decision makers of firms, investors, auditors, and regulators to identify the characteristics of comparable accounting information.

이익의 질과 현금흐름이 회사채 신용등급 결정에 미치는 영향력 분석

박영규 ( Young Kyu Park ) 한국금융학회 2008 금융연구 Vol.22 No.3

본 연구에서는 재량적 발생 액과 회사채신용등급과의 관계를 재검토하였다. 기존논문의 문제점을 보완하기 위해서 당기 순이익 대신에 영업현금흐름을 포함하여 재량적발생액과 회사채신용등급과의 관계를 분석하였다. 실증분석을 통해서 다음의 결과를 발견하였다. 먼저, 재량적발생 액과 신용등급간의 유의한 관계를 발견할 수 없었고, 반면에 현금흐름은 신용등급과 유의한 양(+)의 관계를 발견했다. 또한 재량적발생액과 영업현금흐름이 함께 포함된 모형에서는 현금흐름과 재량적발생액 모두 신용등급과 양(+)의 관계가 나타났다. 이는 신용등급을 평가함에 있어서 재량적발생액만을 고려하지 않고 당기순이익의 일부로써 고려하고 있음을 보여준다. 추가적으로 기존의 모형을 적용하여 신용등급변화와 재량적발생액의 관계를 검증하였으나 유의한 관계는 발견하지 못하였다. Previous studies in Korea have showed the mixed results of the relation between corporate bonds` grade and discretionary accruals. Kim, Wee, and Jeon(2006) find that the discretionary accruals of the better grade group are significantly lower relative to those of the worse grade group and the discretionary accruals have significantly negative relation to corporate bonds grade. This empirical results suggest that discretionary accruals are negative relation with corporate bonds` grade. Choe and Na(2006) find that the discretionary accruals of firms with upward changes of bond grades or with no changes of bond grades are higher than those with downward changes of bond grades. The result of Choe and Na (2006) is contradictory to that of Kim, Wee, and Jeon (2006). The discretionary accruals are not included in the list of rating factors by Korea Investors Service (KIS), which is one of rating agency in Korea. This paper questions whether the impact of discretionary accruals on rating corporate bond grade exists or not. The aim of this study is to find whether credit rating agency consider discretionary accruals as the factor of rating the corporate bonds` credit grade. To get clear empirical results, this study strengthens the research methodologies and corrects the mistake of previous research. First, some variables (DTAC, CFO, and LEV) are used as industry-adjusted values to control industry effect. The second, I decompose net income(NI) into cash-flow from operation(CFO) and discretionary accruals(DTAC) and correct Kim, Wee, and Jeon(2006)`s credit rating model which includes both NI and DTAC. The decomposition of NI is important because both inclusion of NI and DTAC causes the misunderstanding of the coefficient of DTAC. NI=CFO+DTAC+NDTAC Y=b0+b1*NI+b2*DTAC+e Y=b0+b1*(CFO+DTAC+NDTAC)+b2*DTAC+e=b0+b1*CFO+(b1+b2)*DTAC+b1*NDTAC+e According to above equations, the coefficient of DTAC is not b2 but (b1+b2). Therefore CFO is included in the regression models instead of NI because CFO has no discretionary accruals. The major findings of this study are as follows. First, there is no relation between corporate bonds` credit grade and the level of discretionary accruals. It is inconsistent with previous results that showed the significant relation between them. Second, bond rating agency does not consider the discretionary accruals as the factor to evaluate bonds` grade but only net income including it. Third, the level of discretionary accruals does not predict the movement of corporate bonds` credit grade. This empirical results show that bonds credit rating agency does not use the discretionary accruals on rating the corporate bonds` credit grade.

감사인 지정과 재량적발생액의 변화: 기업과 감사인의 역할

강선민 ( Sun Min Kang ),황인태 ( In Tae Hwang ) 한국회계학회 2007 회계학연구 Vol.32 No.4

In order to establish corporate governance for the high accounting transparency, balanced role of corporations, auditors and government agency must set forth beforehand. Rezaee(2002) claims that high-quality financial reports, including reliable financial statements free of material misstatements caused by errors and fraud, can be achieved when there is a well-balanced functioning system of corporate governance. Corporate governance system is a supervisory system of board of directors, audit committee, top management team, internal auditors, external auditors and governing bodies. Even though a corporation that has provided their auditor with false accounting information should be held responsible primarily for accounting fraud, the public opinion including the press tends to place more responsibility on the auditor. On the other hand, auditors were not held responsible for accounting fraud or the court put them responsible for 30% at the most in most precedent cases relating to accounting fraud. Such fact produces evidence that the roles and responsibility of corporations are greater than those of auditors. Moreover, the recent cases have ruled that top management team of corporations that have committed accounting fraud should take more greater responsibility than auditors that could not find the matter of accounting fraud in their audit. Studies on accounting transparency have interpreted changes in transparency as effect on improving financial system or differences according to characteristics of auditors while overlooking the role of corporations with the primary responsibility for producing financial information. This might have been caused mainly by the fact in which it is impossible to divide roles of different bodies in reality. Thus, this research examines in what extent corporations and auditors have taken their roles in the quality of financial reports measured by discretionary accruals. In order to carry out this study, we analyze the effect of corporations and auditors in transparency using the auditor designation system in which the type of auditor appointment is different . This study proves the extent of effect of corporations and auditors on their effort to accomplish transparency by measuring discretionary accruals before, during and after the auditor designation while considering the fact that the type of appointment changes in case of designating auditors. To perform this analysis, we divided the periods of 1,528 corporation/year samples into before, during and after the designation on 308 corporations with designated auditors from 1998 to 2004. Then, we performed paired t-test and regression analysis using discretionary accruals estimated by modified Jones model. First, discretionary accruals decreased during auditor designation, which was consistent with the previous studies. However, the discretionary accruals had begun to decrease two years prior to the designation. Thus, it makes difficult to conclude that the improvement in auditor independence is solely responsible for the decrease in discretionary accruals. In other words, corporations could anticipate the auditor designation in the following year according to the related regulations before the designation. Thus, they would make an effort to accomplish transparency before the auditor designation. Consequently, the decrease in discretionary accruals between the periods before and during the designation can be considered as mixed effect of corporations and auditors. Second, we differentiated such mixed effect into the effect of corporations and auditors. We set the difference in discretionary accruals between the periods before and after the designation as the corporation effect in which the form of auditor appointment was identical as the unrestricted one. We defined the difference in discretionary accruals between the periods during and after the designation as the auditor effect in which the forms of auditor appointment were different from one another. As a result, the discretionary accruals after the designation significantly decreased compared to those prior to it. The auditor appointment before and after the designation periods were all unrestricted so that the difference in discretionary accruals is thought to be the effect of corporations caused by the auditor designation system. That is, changes in corporations` recognition on accounting transparency have been improved through the auditor designation system while becoming aware of supervision of the market. Third, we analyzed the difference in discretionary accruals before and after the designation period, in which the forms of appointment were different, to discover whether the independence of designated auditor improved as compared to the unrestricted auditor. As a result, the discretionary accruals significantly increased after the designation period that implies the independence of designated auditor improved as compared to the unrestricted auditor. Lastly, we observed the changes in discretionary accruals of controlled corporations to prove whether the aforementioned results were unique phenomena applying specifically to those corporations with designated auditors. As a result, the discretionary accruals of controlled corporations exhibited were reversed considering the essential characteristics of discretionary accruals themselves. However, no statistical similarity was discovered. We understand the role of corporations, the primary provider of financial information, is the most important in improving transparency considering the structure of corporate governance system even though the role of external auditor is also important. This research proposes the improvement in accounting transparency through the auditor designation system as a result of mixed effort between the improvement of independence of designated auditor and the effort of corporations. In order to prove this point, observing changes in discretionary accruals with respect to the auditor designation system, in which the forms of auditor appointment were clearly classified, contributed to understand the role of corporations in the improvement of transparency that has previously been overlooked.

재량적 발생액과 부채조달비용 간의 관계에 대한 실증적 증거

박종일 ( Jong Il Park ),윤소라 ( So Ra Yoon ) 한국회계학회 2014 회계학연구 Vol.39 No.3

The purpose of this study is to examine the relationship between discretionary accruals and cost of debt financing. Earnings management studies are common in accounting literature. Theory and evidence indicate that managers` concerns over current performance motivate them to engage in boosting reported earnings. Analysis of earnings management often focuses on management`s use of discretionary accruals. Managers can exercise discretion over accrual choices that are allowed under GAAP in order to reach a desired level of earnings. This is, firms` management manages earnings because they have some incentives to do so. However, earnings management hides a true performance of a firm from debtholders and other external parties. Earnings management also distorts quality of reported earnings, and quality of accounting information impacts debtholders` estimates of future cash flows fromwhich debt repayments will be served. As a result, opportunistic earnings management activities increase information asymmetries between managers and outside investors with respect to a firm`s true underlying performance, which in turn increase information risk faced by outside investors. Especially, debtholders have contractually fixed claims such as periodic interest payments. They tend to focus on future cash flows to ensure a firm`s ability to pay interest and principal. In addition, unless debtholders can see through and undo earnings management, their resource allocation decisions are potentially affected in a negative way. In that regard, examining the effect of opportunistic earnings management in the debt market is important. Prior studies expected that debtholders increase interest rates on firm`s debts when managers increase discretionary accruals ( DA) for the purpose of opportunistic earnings management. This expectation is coming from debtholders` point of view, because it is based on the assumption that rational debtholders can effectively see through a firm`s level of discretionary accruals. Then, prior papers assert that rational debtholders are able to see through managers` attempts to opportunistically influence earnings perceptions and penalize firms for doing so by demanding a higher rate of return. However, from manager`s point of view, we should observe the negative relationship between discretionary accruals and cost of debt, so we will be able to explain the managers` economic motivation to decrease cost of debt using discretionary accruals. Prior researches provide inconsistent empirical evidence on this relationship. Prevost et al. (2008) cannot find a significant relationship between discretionary accruals and cost of debt measured by bond`s yield spreads, while Park et al. (2011) and Lee and Ko (2012) find a significantly positive association between these two variables. However, these prior studies have several limitations. For example, Park et al. (2011) focus on bond issuing firms only and Lee and Ko (2012) measure discretionary accruals taking absolute value of them. Therefore, this study is meaningful because it extends prior researches and examines the association between cost of debt ( YS) measured by borrowing`s yield spread and the level of discretionary accruals ( DA). This paper analyzes all samples including not only bond issuing firms but also bond unissuing firms, and KOSPI and KOSDAQ listed firms in order to generalize the test results. Sample periods are from 2001 to 2011, and totally 10,479 firm-year samples are used in this research. This paper finds the following results. First, there is a statistically significantly negative association between cost of debt and discretionary accruals at 1% level, even after controlling firms` credit ratings and other variables that can affect firm`s cost of debt. This result is consistent in full samples including KOSPI and KOSDAQ firms, and in each type of stock markets separately. Also, we find the same results no matter whether we use discretionary accruals in Dechow et al. (1995) or performance-adjusted discretionary accruals in Kothari et al. (2005). Meanwhile, this significantly negative association between two variables is coming from bond unissuing firms rather than bond issuing firms. Second, unlike the prior studies, we cannot find a statistically significant relation between cost of debt and discretionary accruals in bond issuing samples when we measure cost of debt using borrowing`s yield spread. This is an inconsistent result with Park et al. (2011). Third, following Prevost et al. (2008), we examine the association between cost of debt financing and interaction term of discretionary accruals and non-investment grade rating (i.e., high default risk firms), but we cannot find that the yield penalty for earnings management is significantly greater for non-investment grade rating, and moreover, debtholders cannot see through the information risk of increasing level of discretionary accruals and managers` attempts of opportunistic earnings management. As a result, we find inconsistent empirical test results with Park et al. (2011) and Lee and Ko (2012). Overall, these findings suggest that debtholders do not see through accrualsbased earnings management. In other words, this evidence suggests that debtholders do not perceive earningsmanagement as opportunistic behavior. Accounting information plays an important role in the capital allocation process. Accordingly, understanding the debt market consequences of earnings management is a relevant and an important issue. In summary, this research implements various analyses to generalize the test result. We includes bond issuing firms and bond unissuing firms, and KOSPI and KOSDAQ firms. We use bare value of discretionary accruals, not just degree of DA, and performance-adjusted DA. We also use a different measurement of cost of debt financing, which is borrowing`s yield spread. With these various approaches, we find that discretionary accruals are statistically significantly negatively associated with cost of debt financing. Therefore, it can support the fact that managers do have economic motivation of opportunistic attempt of earnings management using discretionary accruals in order to reduce cost of debt. This implies that debtholders cannot effectively detect increasing information risk of firms due to the earnings management and they do make a capital allocation decision functionally fixed to reported earnings, although managers increase reported earnings using discretionary accruals in order to reduce cost of debt. Therefore, this study provides several meaningful contributions because it can be an evidence of inefficient allocation of resources in the debt market due to managers` opportunistic attempts of earnings management. This research also contributes to provide useful information regarding earnings management to scholars, practitioners, accounting standard setters, and regulators alike. In addition, researchers who are interested in this area can also apply the discussion in this paper for future studies.