금융기관 주요주주와 이익조정과의 관계: 비대기업집단을 중심으로

Due to the fact that traditional monitoring or regulatory mechanisms, such as external audit or accounting regulation that are supposed to prevents managers' earnings management, cannot restrict managers' earnings management successfully, it will be important to explore the role of outside blockholders (i.e., shareholders who have a shareholding at least a 5% equity) as an alternative mechanism to constrain managers' opportunistic earnings management behaviors. As a typical type of outside blockholders, financial institutions can effectively control earnings management as capital providers. In particular, financial institution blockholders tend to play an important monitoring role in managers' earnings management with voting rights awarded with their holding. However, this tendency can be different depending on the characteristics of individual financial institutions. Following the reform for the financial services sector enforced in 2006, which were intended to improve the transparency as well as effectivenss of Korean financial sector, by the promulgation of several new laws, Korean financial institutions are classified into three broad categories: banks, insurance companies, and investment banks. For each category, different regulations are applied to the institutions. Therefore, there is a possibility that these different characteristics of three financial institutions differentially influence the monitoring effectiveness. This is because there is a difference, in terms of interests, investment patterns, and regulatory environment associated with the types of financial institution blockholders, such as banks, insurance companies, and investment banks. In this context, this study focuses on the role of individual blockholders as financial institutions for the control of earnings management. Recent accounting studies reveal that managers switch the method of earnings management from accruals- based to real earnings management (Cohen et al. 2008). Therefore, this paper analyzes the effect of monitoring role of financial institution blockholders on managers' accruals-based and real earnings management for Korean firms. More specifically, we analyze the association between financial institution blockholders and proxies for the magnitude of earnings management, such as discretionary accruals and three proxies of real earnings management: abnormal cash flow from operations, abnormal production cost and abnormal discretionary expenses. The sample for this study is obtained from firms listed on the Korea Exchange (KRX) from 2006 to 2010. We employ the total sample using 1,876 firm-year observations retrieved from the KIS-LIBRARY database and the matching sample for the types of blockholders, such as banks, insurance companies, and investment banks. The data of financial institution blockholders are collected from the annual reports of the DART system by the Financial Supervisory Service (FSS) and the TS-2000 database provided from the Korea Listed Companies Association (KLCA). Also, we collect other financial data from the KIS-LIBRARY database. Our empirical findings are summarized as follows. First, we find that an insurance blockholder ownership (existence) is negatively associated with the opportunistic earnings management using discretionary accruals. Also, we find that an investment bank blockholder ownership is negatively associated with the use of both accruals- based earnings management and real earnings management, such as abnormal cash flow from operations. Second, this study demonstrates that the holding level of bank blockholders, insurance blockholders, and investment bank blockholders is not associated with accruals-based earnings management and real earnings management, respectively. The results suggest that the existence of blockholdings by financial institutions, rather than the percentage of shareholding, is important to the monitoring behaviors of the institutions. Third, the effect of investment bank blockholders on restricting both accruals-based earnings management and real earnings management are revealed to be a more effective after financial service sector reform. Fourth, we find that the reducing effects of investment bank blockholders on accruals-based earnings management and real earnings management, such as abnormal cash flow from operations, are a less pronounced in the case of long-term investment by the blockholders. Finally, this result implies that in the case of firms associated with higher tendency to depend on bank loans, bank blockholders effectively control the real earnings management, such as abnormal production cost. In summary, these findings suggest that the effectiveness of monitoring by financial institution blockholders differ depending on various characteristics. These results may prove particularly useful for regulators in the plan of institutional improvement for accounting transparency in financial industry sector, and might contribute to the improvement of corporate governance and the governmental policy- setting for further financial reforms. Since there have been not many prior studies on financial sector, we hope more studies to investigate various firm behaviors and regulatory effectiveness in this sector in the future.