An Empirical Study on Corrective Disclosure of Annual Reports in Korea

This study examines the current state of annual report correction and the characteristics of companies that made such corrective disclosures. It also analyzes the stock market's response to the recommended corrective disclosure of annual reports. The correction of annual reports occurs more frequently in small companies with low profitability and the market did not respond to the correction of annual reports. Correction of annual reports is a result of the error in current reports, and the FSS recommended the corrections, which include voluntary corrections. The stock market responded positively to the correction of errors in annual reports, suggesting that there is no penalty from the market for false entries in annual reports. The market is not aware of many of these corrective disclosures and also does not impose a penalty for the correction of annual reports.