감리지적 기업의 경영자, 이사회 및 외부감사인 특성

The reliability of financial statements may be influenced by management, corporate governance structure and external audit quality. Management is responsible for fairly preparing financial statements according to GAAP. Corporate governance structure plays an important role in internally monitoring management's financial reporting process. Independent external auditors attest to whether financial statements include material misstatements. In this paper, we investigate characteristics of firms subject to Korean Securities & Futures Commission (KSFC) enforcement (hereafter, fraud firms), compared with those which are not subject to KSFC enforcement. We focus on characteristics of management, board of directors including the audit committee, and external auditor. We identify firms subject to KSFC enforcement disclosed on the internet site of KSFC form the year 2000 to 2005. Using sample selection criteria such as non-financing firms and data availability, we obtain 84 fraud firm-year data. To use the matched-pairs analysis, each fraud firm was matched with a non-fraud firm on the basis of firm size, industry code, and external auditor quality criteria. Our final samples consist of 168 firm-year data (84 fraud firm-year data and 84 matched non-fraud firm-year data). Using logistic regression models, we investigate the differences in characteristics of management, corporate governance system and external auditors between fraud firms and matched non-fraud firms. In our models, the dependent variable is a dummy variable indicating whether each observation is a fraud firm or not. Independent variables include characteristics of management, corporate governance structure including audit committee, and external auditor. Based on the agency theory, we investigate four characteristics of management (owner-manager dummy, existence of stock option-based compensation plan, whether or not firms belong to the largest 30 Korean company groups, and top management tenure). Characteristics of corporate governance structure include independence of board of directors, outsider director's average tenure, outside directors' activities, the number of outsider directors, and the existence of the audit committee. We also include characteristics of external auditor such as first-year audit dummy, auditor tenure and type of audit opinion. Control variables such as firm size, financial status variables, operating performance variables are selected and included in our models on the basis of prior research results. Our main findings are as follows: Firstly, consistent with the agency theory expectation, we find that owner-controller firms are less likely to be subject to KSFC enforcement. This result implies that professional management controlled firms have incentives to misstate financial reports, which may lead to KSFC enforcement. We also find that firms which belong to the largest 30 Korean company groups are more likely to be subject to KSFC enforcement. This result can be interpreted as existence of agency problems between majority ruling shareholders and minority shareholders. Firms which belong to the largest 30 Korean company groups may be governed by majority ruling shareholders who want to maximize their own utilities at the expense of minority shareholders, which may reduce the quality of financial reporting. The independent variable representing existence of stock option-based compensation plan has a significant negative association with KSFC enforcement in our integrated model. However, our additional sensitivity analysis shows that relationship between existence of stock option-based compensation plan and KSFC enforcement is statistically unstable, which may be caused by limited data size or multi-collinearity problem. Secondly, among characteristics of corporate governance structure considered in the paper, only the size of outside independent directors within board of directors is associated with lower probability of being subject to KSFC enforcement. The other corporate governance variables have no significant associations with KSFC enforcement. Lastly, among characteristics of external auditors, type of audit opinion is negatively associated with KSFC enforcement in our integrated model. However, the association between those two variables shows no consistent results in our additional analysis. Our study expands previous literature investigating characteristics of firms subject to KSFC enforcement in terms of the following two aspects. One is that this paper identifies three group of stakeholders (management, board of directors and external auditor) who may affect reliable financial reporting process and systematically investigates characteristics of firms involved in fraudulent reporting. The other is that while previous Korean literature focuses on financial characteristics of fraud firms, this study includes characteristics of management who has a direct responsibility for reliable financial reporting, and this paper finds that agency problems both between owners and managements and between majority shareholders and minority shareholders can result in fraudulent financial reporting. Our findings can help regulators such as KSFC in selecting sample firms to examine whether those firms and their external auditors are involved in fraudulent financial reporting.