Drawing on local legitimacy theory,which posits that firms seek acceptance and approval from their local community and stakeholders,we examine the effect of corporate governance(CG)quality on corporate social responsi...Drawing on local legitimacy theory,which posits that firms seek acceptance and approval from their local community and stakeholders,we examine the effect of corporate governance(CG)quality on corporate social responsibility(CSR)activities in Korea.Enhancing CG quality and engaging in CSR activities are increasingly important for firms’long-term sustainability.Using the KEJI-CSR index and the KCGS CG score,we find that CG quality positively influences CSR activities.Specifically,if the CG quality score increases by one standard deviation,CSR improves by approximately 1.6–2.3%of the mean CSR score.Furthermore,the relationship between CG and CSR is stronger for business conglomerates(chaebol-affiliated firms),suggesting that sound CG practices can promote CSR activities more effectively when the interests of management and stakeholders are better aligned.This finding supports local legitimacy theory.Our findings are robust under various tests,including difference-in-differences analysis and propensity score matching.An interesting policy implication is that multinational enterprises or foreign investors should prioritize the CG quality of their local subsidiaries or investee firms.Better CG practices can enhance CSR activities,which are essential for long-term survival in local markets.This study,however,is limited to Korea and may not be generalizable to other emerging markets with different governance structures.展开更多
This paper examines chaebol(Korean business group)firms'earnings management methods in pre-and post-financial crisis periods in Korea.The financial crisis resulted in chaebol firms increasing their reliance on the...This paper examines chaebol(Korean business group)firms'earnings management methods in pre-and post-financial crisis periods in Korea.The financial crisis resulted in chaebol firms increasing their reliance on the external capital markets as chaebol firms achieved internal financing through arbitrary transactions among their affiliated and contracted firms.This produced a higher demand for financial reporting transparency in chaebol firms and strengthened monitoring from investors.These changes in the business environment in Korea following the financial crisis are likely to have led chaebol firms to reduce earnings management by using managers'discretion in accounting accruals and to seek alternative means to manage earnings through abnormal operating decisions which are referred to as real activities manipulation.The authors find that chaebol firms have significantly decreased accrual-based earnings management after the financial crisis of Asian compared to non-chaebol firms.The authors also find that chaebol firms have become more inclined to engage in real earnings management after the financial crisis.The results suggest that chaebol firms have shifted their earnings management methods from accruals manipulation to real activities manipulation which is harder to be detected by external auditors and regulators.This study provides insight into the changes in chaebol firms'earnings management methods triggered by economic shock.The findings suggest that the shift in chaebol firms'financing sources from internal to external capital markets and the increased demand for transparent financial information in the post-financial crisis period are likely to have influenced chaebol firms to substitute real earnings management for accrual-based earnings management after the financial crisis.展开更多
文摘Drawing on local legitimacy theory,which posits that firms seek acceptance and approval from their local community and stakeholders,we examine the effect of corporate governance(CG)quality on corporate social responsibility(CSR)activities in Korea.Enhancing CG quality and engaging in CSR activities are increasingly important for firms’long-term sustainability.Using the KEJI-CSR index and the KCGS CG score,we find that CG quality positively influences CSR activities.Specifically,if the CG quality score increases by one standard deviation,CSR improves by approximately 1.6–2.3%of the mean CSR score.Furthermore,the relationship between CG and CSR is stronger for business conglomerates(chaebol-affiliated firms),suggesting that sound CG practices can promote CSR activities more effectively when the interests of management and stakeholders are better aligned.This finding supports local legitimacy theory.Our findings are robust under various tests,including difference-in-differences analysis and propensity score matching.An interesting policy implication is that multinational enterprises or foreign investors should prioritize the CG quality of their local subsidiaries or investee firms.Better CG practices can enhance CSR activities,which are essential for long-term survival in local markets.This study,however,is limited to Korea and may not be generalizable to other emerging markets with different governance structures.
文摘This paper examines chaebol(Korean business group)firms'earnings management methods in pre-and post-financial crisis periods in Korea.The financial crisis resulted in chaebol firms increasing their reliance on the external capital markets as chaebol firms achieved internal financing through arbitrary transactions among their affiliated and contracted firms.This produced a higher demand for financial reporting transparency in chaebol firms and strengthened monitoring from investors.These changes in the business environment in Korea following the financial crisis are likely to have led chaebol firms to reduce earnings management by using managers'discretion in accounting accruals and to seek alternative means to manage earnings through abnormal operating decisions which are referred to as real activities manipulation.The authors find that chaebol firms have significantly decreased accrual-based earnings management after the financial crisis of Asian compared to non-chaebol firms.The authors also find that chaebol firms have become more inclined to engage in real earnings management after the financial crisis.The results suggest that chaebol firms have shifted their earnings management methods from accruals manipulation to real activities manipulation which is harder to be detected by external auditors and regulators.This study provides insight into the changes in chaebol firms'earnings management methods triggered by economic shock.The findings suggest that the shift in chaebol firms'financing sources from internal to external capital markets and the increased demand for transparent financial information in the post-financial crisis period are likely to have influenced chaebol firms to substitute real earnings management for accrual-based earnings management after the financial crisis.
