22 research outputs found

    Audit Quality And Earnings Management: Evidence From Shanghai Stock Market In China

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    The prior studies report that the global big4 audit firms (Big4) generally provide higher quality audit services compared to the local audit firms, but inconsistent result on audit quality of the Big4 audit firms was observed in the Chinese stock market. We believe that it may be not appropriate to distinguish high or low audit quality as separating the Big4 and non-Big4 because the market share of the Big4 and non-Big4 on Shanghai stock market is considerably lower than that of other countries. Therefore, we use the measure of Chinese big10 audit firms (Big10) as higher audit quality and examine the association with the level of earnings management using the sample of Shanghai Stock Market listed companies in China. From the empirical tests, we find that the Big10 provide better audit service to prevent their clients’ earnings management than non-Big10 audit firms. The finding of this study demonstrates the Big10 provide differentiated audit service from non-Big10 audit firms on Shanghai stock market in China

    New Chief Executive Officers Earnings Forecasts Bias At Their First Year Term And Role Of Financial Analysts: Korean Evidence

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    This study investigates newly appointed Chief Executive Officers (CEOs) earnings forecasts bias at their first year term using listed firm data in Korea. Prior literature reports that new CEOs prefer to report low earnings (big bath or cookie jar accounting) at their first year term for the purpose of income smoothing. However, it is hard to find the studies about new CEOs earnings forecasts bias at the term of low earnings reporting incentive. We question what earnings forecasts bias they usually have when they are interested in low earnings reporting.From the empirical tests, we find that newly appointed CEOs tend to provide conservative (negative) forecasts instead of optimistic (positive) forecasts at their first term. Furthermore, we find that greater analyst following helps to relieve the negatively biased earnings forecasts of new CEOs.This study will contribute to academics and disclosure-related practitioners by documenting about newly appointed CEOs earnings forecasts bias. We also believe that our empirical evidence will be helpful to market participants when they make a business decisions in case of CEO turnover

    Analyst Coverage And Audit Efforts: Empirical Approach To Audit Hours

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    This study investigates the effect of financial analyst coverage on audit efforts by examining the association between the number of analyst followings and audit hours. Existing literatures report that there are inconsistent results between analyst coverage and audit efforts, and most studies used audit fee as a proxy for audit efforts. However, audit fee may cause measurement error. We consider that audit hour is a better proxy for measuring audit efforts than audit fee because practically auditors are less likely to charge extra audit fee for their additional efforts in competitive audit market. Also, after audit engagement contract, the amount of audit fee is almost fixed. Thus, it cannot reflect variable auditors’ decision whether inputting additional efforts or not during audit service. Intuitively, audit hours are more accurate measure of audit efforts as long as it indicates how much hours auditors work. For the above reasons, we use unique dataset of audit hours in Korea. We find that analyst coverage is positively associated with audit hour. This means auditors make more efforts on their audit service in case of greater analyst following, and they crucially consider reputational damage from audit failure when they provide audit services to their clients with great analyst following. Next, we still observe positive relation in both pre and post global financial crisis periods. Lastly, we find that BIG4 auditors are more concerned about reputational loss than Non-Big4 in case of greater analyst following

    The Effect Of Chief Executive Officers Turnover On International Financial Reporting Standards Reconciliation

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    We investigate the impact of Chief Executive Officer (CEO) changes on International Financial Reporting Standards (IFRS) reconciliation. Since January 1st, 2011 all Korean listed companies are required to adopt IFRS in their separate and consolidated accounts. To aid investors in evaluating corporate performance over time, the companies must restate the K-GAAP financial statements for 2010 under IFRS. We find that negative IFRS reconciliation is more frequent for firms with CEO turnover in 2011. The result suggests that new CEOs have an incentive to report lower earnings through IFRS reconciliation for the purpose of big bath. Additionally, in order to examine whether new CEOs’ incentive of the negative IFRS reconciliation is existed in different corporate governance levels, we classify the companies into strong and weak corporate governance. From the test, we find that their incentive of negative IFRS reconciliation is disappeared (existed) in the companies with strong (weak) corporate governance.   This study will contribute to academics and disclosure-related practitioners by providing valuable information of the CEO incentive regarding IFRS reconciliation. We believe that our empirical evidence will be helpful to market participants when they make a business decisions in case of CEO turnover

    The Effect Of Directors And Officers Liability Insurance On Audit Effort

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    This study investigates the effect of directors and officers liability insurance (hereafter, D&O liability insurance) on audit effort of auditors. D&O liability insurance is a liability insurance payable to top executives of a company as indemnification for losses or litigation costs from the lawsuits. Companies carry D&O liability insurance for the purpose of protecting their directors and officers from the legal actions. However, according to prior studies, the managers of their companies with D&O liability insurance may become more risk averse, and they take more risks for their decision. If D&O liability insurance causes more risks at the company, auditors for the companies may use the information of D&O liability insurance as a risk factor at the audit engagement. This study examines whether D&O liability insurance has a significant influence audit effort of auditors empirically. We use the mandatory disclosed Korean data of D&O liability insurance for testing the association between D&O liability insurance and audit effort. From the results, we find that auditors use D&O liability insurance information for setting the amount of audit effort. Also, both Big4 and Non-Big4 use D&O liability insurance as useful informaion.

    The Effect Of IFRS Adoption On Likelihood Of Management Earnings Forecasts: Evidence In Korea

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    Korean listed companies adopted International financial reporting standards (IFRS) in 2011 mandatorily. The IFRS adoption modifies corporate financial reporting structure and further it can affect managers’ incentive for disclosing their earnings forecasts. We investigate the association between IFRS adoption and likelihood of management earnings forecasts. From the empirical results, we find that mandatory IFRS adopted companies are less likely to issue their earnings forecasts after IFRS adoption. It implies that investors’ belief about management earnings forecasts as useful information is weakened after IFRS adoption compare to pre-IFRS adoption period. Therefore, managers’ incentive for providing earnings forecasts decreases. This study will contribute to academics and disclosure-related practitioners by reporting how IFRS adoption makes an influence to managers’ incentive of management earnings forecasts issuance. We also believe that the empirical evidence may shed some lights on the understanding of the spillover effect of IFRS adoption to management earnings forecasts.

    The Influence Of Firm’s Fair Value System On Earnings Quality Under IFRS

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    This paper analyzes the influence of firms’ fair value system on earnings quality under IFRS. Korean firms are required to adopt IFRS in 2011. IFRS adoption was expected to increase value relevance of book value of equity and benefit information users’ decision making. However, prior Korean studies report that value relevance of book value of equity is indifferent between under K-GAAP and IFRS. We consider that the indifference in value relevance of book value of equity after IFRS adoption is due to different level of fair value system among firms. We investigate whether the different level of fair value system among firms lead to the difference in earnings quality. Furthermore, we examine how each firm’s fair value system affect earnings quality under IFRS.  This study finds following results. First, firms with weak fair value system smooth income more frequently. Second, firms with weak fair value system experience small amount of positive profit and slight increase in net income compared to prior period more frequently. Third, firms with weak fair value system make less timely loss recognition. Lastly, book value of equity and goodwill has low relative value relevance for weak fair value systemic firms, while both book value of equity and goodwill have incremental value relevance for firms with strong fair value evaluation system

    Discovery of a novel allelic variant of CYP2C8, CYP2C8∗11, in asian populations and its clinical effect on the rosiglitazone disposition

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    ABSTRACT: The objectives of this study were to identify the genetic variants of CYP2C8, analyze CYP2C8 single nucleotide polymorphisms (SNPs), and characterize their functional consequences in the CYP2C8 substrate drug rosiglitazone in humans. The direct full sequencing of CYP2C8 genomic DNA was performed in a Korean population (n ‫؍‬ 50). A total of 17 CYP2C8 variants including a novel coding variant (E274Stop) were identified. The novel CYP2C8 E274Stop variant was assigned as CYP2C8*11 by the Human Cytochrome P450 (CYP) Allele Nomenclature Committee. Seventeen SNPs were used to characterize linkage disequilibrium, haplotype structures, and haplotype tagging SNPs. Genotyping for CYP2C8*11 in an extended set of Koreans (n ‫؍‬ 400), whites (n ‫؍‬ 100), Han Chinese (n ‫؍‬ 348), Vietnamese (n ‫؍‬ 100), and African Americans (n ‫؍‬ 93) was performed by a newly developed pyrosequencing method. The frequency of CYP2C8*11 was 0.3% in Koreans, 1% in Vietnamese, and 0.14% in Chinese. However, none of the whites or African Americans contained the CYP2C8*11 allele. Subjects with CYP2C8*1/*11 exhibited higher plasma concentration-time profiles of rosiglitazone than those of nine control subjects carrying CYP2C8*1/*1. The area under the concentrationtime curve and peak plasma concentration of rosiglitazone in individuals carrying CYP2C8*1/*11 (n ‫؍‬ 5) were 54 and 34% higher than the mean values observed in the control subjects carrying CYP2C8*1/*1 (P ‫؍‬ 0.015 and P ‫؍‬ 0.025, respectively). In summary, this is the first report to characterize the allele frequency and haplotype distribution of CYP2C8 in a Korean population, and it provides functional analysis of a new variant CYP2C8*11. Our findings suggest that individuals carrying CYP2C8*11, a null allele found in Asians only, may have lower activity for metabolizing CYP2C8 substrate drugs

    Corporate Social Responsibility and Sustainable Employability: Empirical Evidence from Korea

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    A firm’s corporate social responsibility (CSR) aids in social well-being, but it is costly. It is thus necessary to study whether a firm’s CSR activities are valuable in terms of costs and benefits for shareholders’ interest. Recent studies reported that firms’ CSR activities help to develop the corporate environment and improve financial performance. In addition, prior studies explained that a firm’s CSR activities can have a positive effect on financial performance by increasing employees’ commitment to their firm. The purpose of this study research is to examine the effect of CSR activities on sustainable employability through empirical analysis. We measured the sustainable employability using the percentage of regular employees and then examined the effect of CSR activities on sustainable employability using 3802 firm-year data for Korean listed firms. From the empirical results, we found that firms engaging in CSR activities improve more in terms of sustainable employability than do firms who are not engaging in CSR activities. We also found that the companies engaging in a high CSR index score showed greater sustainable employability than did those with a low CSR index score. The results of this study suggested a way to increase sustainability in terms of employment by supporting a rational basis for companies to adopt CSR. These findings are expected to contribute to academia and the capital market by providing empirical evidence that a company’s CSR activities have a positive impact on sustainable employability
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