흑자보고 전환 가능성이 적자보고 가치 관련성에 미치는 영향

This study investigates alternative hypotheses for valuation of losses. The first explanation is the abandonment option hypothesis. Hayn(1995) suggests investors of loss firms will redeploy or liquidate the assets of the firm if they expect the loss to be continued. Accordingly, losses dampen cross-sectional estimates of earnings-returns or prices correlations. The second explanation is loss persistence hypothesis. While gains can potentially persist, losses can only continue for a number of years. If investors expect the firm's loss period to last a relatively short time, losses may communicate little information about future earnings. Therefore, investors' expectations of loss persistence varies the valuation of losses. This study examines probabilities of subsequent loss reversal on proxy for the likelihood of abandonment option or loss persistence. We also examines how conservative accounting affects probabilities of loss reversal. The conservatism inherent in the accounting dictates unequal treatment of gains and losses, with losses recognized immediately and gains recognized over time as earned. Thus a loss is less likely to persist over time(Basu 1997). To examine on probabilities of loss reversal(future loss persistence), we construct logistic model using the variables that were verified by Joos and Plesko(2005). And, to examine the effect of probabilities of loss reversal on loss valuations, we construct regression models using Hayn(1995), Joos and Plesko(2005), and Kim(2003). The sample consists of 638 non-banking reporting losses of firm-years listed on the Korean Stock Exchange with the December fiscal year-end over 1996-2005. Empirical findings are summarized as following. First, losses aren't significantly associated with returns. Second, earnings-returns correlation on losses for high probabilities of loss reversal are larger than for low probabilities of loss reversal, consistent with the abandonment option hypothesis. We also indicate that conservative accounting treatment affects loss firm's reversal probability in the next year.