Earticle

초록

영어

This study examines the relation between CEO centrality and earnings management to avoid losses and earnings decreases in Korea. Agency theory suggests that CEO centrality exacerbates agency problem as powerful CEOs tend to be overconfident and choose risky corporate strategies. On the other hands, Stewardship theory asserts that CEO centrality may be ideal for firm value and performance because of the unity of leadership and control it presents. While those two views are predicting contradictory impact of CEO power concentration on earnings management, empirical research examining the association between CEO centrality and earnings management in Korea does not exist, to our knowledge. As such, this study is the first that provides Korean evidence on the relationship between CEO centrality and earnings management. To achieve the afore-mentioned research objective, we examine whether the earnings management to losses and earnings decreases is systematically related with the proxy of CEO centrality using a ordinary logistic regression model and two stage least squares model (2SLS). Proxy for CEO centrality is developed using CEO pay slice suggested by Bebchuk et al.(2011). In particular, the CEO pay slice (CPS) calculated as a ratio of total CEO compensation to the total compensation of all directors in the board, captures the relative importance of CEO within the management team. To identify earnings management to losses and earings decreases, we classify suspected firms that show small positive earnings or small earnings increases according to Burgstahler and Dichev(1997). Our sample is drawn from companies listed on the KRX for which the information of executive compensation is available. Up to 2012, information of individual executive compensation was not mandatory disclosure item in annual reports, but from 2013 Korean listed firms should be required to disclose their executives’ pay information in annual reports if total compensation of an individual executives is more than 500 million won a year, following recent revisions to the capital market act. Thus our sample period covers 3 years from 2013-2015 and the final sample includes 927 firm-years from both manufacturing and non-manufacturing industries. We find a positive and significant relationship between CEO centrality and earnings management to avoid losses but not earnings decreases. This finds is robust to additional test(2SLS). These results indicate that CEO centrality restricts capabilities for monitoring and checking on inefficient managerial decision, which will lead to increased propensity to earnings management, thereby can pass on the economic cost to the outside investors. The contribution of this study is as follows. First, this study provides the first comprehensive Korean evidence of how CEO centrality is related to earnings management. Second, we incorporate recent innovations in measuring corporate governance system into our research design by using CEO pay slice as an empirical proxy of CEO centrality. Third, the results documented in this paper provide significant policy implications regarding the future directions on the regulatory measures to be implemented with the regard to the corporate governance system in the Korean capital market. The evidence obtained herein suggests the need for more rigid screening schemes to control earnings management in a situation when powerful CEO can influence over the board and also for adequate measures to be taken to ensure that the interests of the outside investors are properly protected from dominant CEO’s arbitrariness.

목차

Ⅰ. 서론
 Ⅱ. 선행연구 및 가설설정
 Ⅲ. 연구설계
 Ⅳ. 실증분석결과
 Ⅴ. 결론
 참고문헌
 Abstract

키워드

저자

• 곽영민 [ Young-Min Kwak | 울산대학교 경영대학 회계학과 ] 제1저자
• 박진모 [ Jin-Mo Park | 울산대학교 경영대학 회계학과 ] 교신저자

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  생산성연구: 국제융합학술지 [Productivity Research: An International Interdisciplinary Journal]

• 간기

  격월간

• pISSN

  1225-3553

• 수록기간

  1987~2025

• 등재여부

  KCI 등재

• 십진분류

  KDC 325 DDC 330