Audit Opinion and Earnings Quality: Evidence from Korea

This study examines whether the decrease in qualified opinions is due to improved accruals quality. The proportion of qualified opinions has been declining in Korea for about 10 years. However, it has not been reported that earnings quality has improved. We analyze this contradictory relationship using two models. We find that Korean firms’ accruals quality has no association with unqualified opinions. This means that the increasing trend in unqualified opinions is occurring regardless of earnings quality, although audit opinion chiefly depends on it. Thus, our results suggest that more researches are required to determine why qualified opinions are declining. Keywords: audit opinion; earnings quality; accruals DOI: 10.7176/EJBM/12-30-02 Publication date:October 31st 202

Do Analysts Fully Reflect Information in Patents about Future Earnings?

This study investigates the relationship between a firm’s intellectual property (measured by patents) and its future business performance and information environments by focusing on financial analysts’ forecasting behavior. The results show that patent citations have more influence on future profitability than patent counts and financial analysts pay more attention to firms with patent citations by showing higher followings for those firms. However, the findings also suggest that analyst forecasts do not fully reflect the implications of the effect of patent citations on future earnings and this under-valuation can mislead investors. Thus, we conclude that financial analysts ‘partially’ improve the information environment in terms of patent citations

Do Analysts Fully Reflect Information in Patents about Future Earnings?

This study investigates the relationship between a firm’s intellectual property (measured by patents) and its future business performance and information environments by focusing on financial analysts’ forecasting behavior. The results show that patent citations have more influence on future profitability than patent counts and financial analysts pay more attention to firms with patent citations by showing higher followings for those firms. However, the findings also suggest that analyst forecasts do not fully reflect the implications of the effect of patent citations on future earnings and this under-valuation can mislead investors. Thus, we conclude that financial analysts ‘partially’ improve the information environment in terms of patent citations

Patent Citations and Financial Analysts’ Long-Term Growth Forecasts

This paper examines the influence of patent citations, a proxy for the quality of firms’ innovation outputs, on financial analysts’ long-term growth forecasts for firms. We find that financial analysts are more likely to issue long-term forecasts for firms with higher patent citations. In addition, we find that financial analysts’ long-term forecasts are more positive for firms with high patent citations. These results imply that patent citations increase financial analysts’ coverage, and result in more positive forecasts for firms with impactful patents. Considering that financial analysts play important roles in allocating financial resources in capital markets, our findings suggest that patents are valuable assets for firms in securing capital from capital markets, and are thus essential for the sustainable growth of firms

Majority Shareholder Ownership and Real Earnings Management: Evidence from Korea

This article examines the influence of majority shareholder ownership on real earnings management. It investigates whether there is a conflict between or an alignment of majority and minority shareholders' interests. If majority shareholders' interests a