기업지배구조가 접대비 및 접대비 한도초과지출에 미치는 영향

The purpose of this paper is to investigate the effect of best corporate governance practices by boards of directors and audit committee in preventing entertainment expense and entertainment expense in excess of corporate tax deduction limit. In particular, this study examine the relation between the level of entertainment expense and characteristics such as independence, competence, and activities level of a firm's board and audit committee. A significant amount of research has accumulated in recent years on the oversight role of corporate board of director and audit committee with regard to their fiduciary duty to act in the best interest of a corporation's shareholders and regulators. Korean corporate tax law prescribes the limit on tax deductibility of entertainment expenditures. This limit is proportional to the amount of revenue, based on the logic that excessive entertainment expense would not contribute to revenue increase. I hypothesize that entertainment expense or excessive entertainment expense will be negatively associated with board and audit committee's independence, expertise, and activity-related variables. The sample of this study includes companies listed in the Korean stock market (excluding financial institutions and using the 2,687 firm-years data) and the analysis period 6 (from 2000 to 2005). The empirical results of this study are as follows. First, for the board characteristics, I find that board independence(defined as the percentage of outside directors), financial expertise(defined as an board containing at least one number with financial expertise), and board activity(the number of board meetings or outsider board participation) are significantly, negatively associated with entertainment expense. These results are as expected, and imply that a more independence, expertise, active board is associated with a lower level of entertainment expense. Second, there is a significantly relation between having a financial expert on the board of outside director, and the number of board meetings and lower level of excessive entertainment expense. However, I find that no significantly negative association between board independence and the level of excessive entertainment expense. Third, for the audit committee characteristics, I find that audit committee expertise(defined as an audit committees containing at least one outside director with financial expertise), and audit committee diligence(meeting frequency) are significantly, negatively associated with a level of entertainment expense. This paper provides initial empirical evidence on the association between board and audit committee's characteristics(independence, expertise, and activity) and entertainment expense(or excessive entertainment expense). These finding suggest that firms with good corporate governance practices by board and audit committee's characteristics may be effective in constraining the level of entertainment expense or excessive entertainment expense include some spending not so much contributing to firm's incremental revenues. The findings of this study also suggest several valuable insights into the composition and regulation of board of outside director and audit committee for the Korean regulators. Further, this finding is consistent with Klein(2002), Xie et al.(2003), who examine the contextual role various board and committee's characteristics.