비상장기업의 자발적 K-IFRS 채택행위와 이익조정의 관련성

In this paper, we investigate the determinants of voluntary adoption of Korean International Financial Reporting Standards (hereafter, K-IFRS) by unlisted firms and the effect of such adoption on the quality of earnings as proxied by accrual and real earnings management metrics. The idea of adopting a single set of high quality accounting standards across the globe has been wide-spread with the start of new millenium, which is expected to enhance the comparability of financial reporting internationally, resulting in improved transparency and liquidity of global capital markets. Korean government decided to follow suit by announcing the road map for the adoption of IFRS on a national level in 2007. According to the road map, all listed companies in Korea are required to prepare their financial statements in conformity with K-IFRS from 2011 on a mandatory basis. On the other hand, Korean Accounting Standards Board promulgated Accounting Standards for Non-Public Entities (Non-Public Standards, hereafter) effective from 2011 with a view to mitigate the burden of unlisted Korean firms to prepare their financial reports. Unlisted firms are also allowed to comply with K-IFRS on a voluntary basis in lieu of Non-Public Standards as they prepare financial statements, thus resulting in double standards from which individual firm may opt to choose one. Despite that the Non-Public Standards are designed to provide an easy-to-apply guidance for unlisted firms in preparing their financial statements, it turns out that a considerable number of unlisted firms in Korea actually adopted K-IFRS on seemingly voluntary basis in 2011. This setting motivated us to investigate the motives as well as the effects of voluntary adoption of K-IFRS by non-public entities in Korea, which is expected to provide additional evidence in terms of the consequences of K-IFRS adoption in Korea. Most of the extant domestic literature discuss the effects of K-IFRS adoption by listed companies and to our knowledge, this study marks the first in Korea that delves into the dual research questions of why certain non-listed firms opt to apply K-IFRS voluntarily despite the potential increased costs and what effect does such choice produce particularly with the regard to the quality of earnings? We further note that a significant number of voluntary adopters are the subsidiaries of listed firms, which are required to prepare their consolidated financial statements in accordance with K-IFRS. Even though these non-listed subsidiaries are allowed to comply with the Non-Public Standards, they are obliged to prepare their individual financial statements in compliance with their parents' accounting policy to enable the preparation of parents' consolidated financial statements. After excluding unlisted adopters affiliated with listed parent companies, we are expected to obtain "genuine" voluntary adopter sample of K-IFRS. With a view to examine the motives of pure voluntary adoption of K-IFRS by unlisted firms, we divide the adopter sample into non-public firms which are subsidiaries of listed parents and independent non-public firms, of which the latter is believed to provide genuine voluntary adopter sample. Moreover, those who favor adoption of IFRS argue that IFRS adoption is likely to increase usefulness of accounting information (FASB 2010; IASB 2010). Recent research on voluntary IFRS adoption suggests that the use of IFRS tends to improve the quality of financial reporting based on the empirical analyses using listed firm samples. However, there are limited evidence on the adoption of K-IFRS by unlisted firms in Korea, and whether the adoption of K-IFRS will result in enhanced quality of earnings under unlisted context still remains unknown. This paper tackles the two afore-mentioned research questions by examining the determinants of voluntary adoption of K-IFRS on the one hand, and by comparing the level of earnings management metrics of voluntary adopters relative to non-adopters of K-IFRS on the other. Firstly, we examine the motives of voluntary adoption of K-IFRS by unlisted firms by comparing the firm characteristics of adopters versus non-adopters of K-IFRS (total sample of 10,446 firms comprising 728 K-IFRS users and 9,718 Non-Public Standards users as of 2011), which will help better understand the costs and benefits associated with the choice of a specific set of accounting standards. It is reasonable to assume that voluntary adopters view K-IFRS as their preferred reporting strategy for a number of reasons to bring about short to long-term benefits which will compensate the present costs. Although voluntary adopters may face considerable costs related to increased information processing and preparation of sophisticated financial reports etc., it would be safe to say that those firms are making rational decisions in the choice of financial reporting standards through weighing benefits against costs. Using multivariate logistic regression analyses, we find that mutual investment restrictions of firms, corporate governance, legal form of companies, auditor reputation, firm age, and growth help explain unlisted firms’ voluntary choice of K-IFRS. Other firm characteristics such as leverage, burden of tax, profitability and internationality do not appear to play a significant role in the K-IFRS adoption. After excluding the subsidiaries of listed parents from the K-IFRS adopter sample, firm characteristics including leverage, corporate governance, legal form of companies, auditor reputation, firm age, profitability and internationality emerged as significant determinants adopting decisions. Nextly, we calculate the predicted probability of the choice decision (via a dummy dependent variable taking a value of one if an unlisted firm uses K-IFRS in 2011 and zero otherwise), namely, the propensity score obtained from estimating multivariate logistic regression. With the scores between 0 and 1 representing the relationship between multiple characteristics and the dependent variable as a single characteristic, we perform propensity score matching (PSM) as a way to reduce sample-selection bias in our study. Case-control matching on the propensity score is known to balance case and control groups, or create covariate balance. Since several adoption effects of IFRS may vary between purely voluntary and seemingly voluntary but mandatory in fact adopters, we examine the effect of voluntary adoption of K-IFRS on earnings management metrics using 1,456 firms for the period of 2011. Based on earnings management literature, we employ both accrual earnings management (AEM hereafter) metrics and real earnings management (REM hereafter) metrics as alternative proxies of earnings quality. To obtain the AEM measures, we employ modified Jones model as suggested in Dechow et al.(1995). The REM measures are derived using the methods suggested by Roychowdhury (2006) to produce abnormal levels of cash flows from operations, discretionary expenses, production costs together with a single comprehensive aggregate measure of real earnings management (RM). Considering the tendency of firms to trade-off real versus accrual-based earnings managements, we also develop another comprehensive measure, Total_EM, to determine whether a firm is classified as an earnings manager or not (Zang 2006). Total_EM is an indicator variable that takes the value of one if either one of the RM or AEM is above the sample median (Cohen & Zarowin 2008), and zero otherwise. The result of our analyses shows that genuine voluntary K-IFRS adoption is, on average, negatively associated with the level of accrual earnings management metrics, which indicates, in part at least, that voluntary adoption of K-IFRS by unlisted firms may play a role to mitigate managerial opportunism thereby enhancing the quality of earnings. These results provide a practical implication suggesting that users may place greater reliability on the financial reports prepared in compliance with K-IFRS on a genuinely voluntary basis by unlisted non-public entities. A potential future avenue for related studies may include an in-depth investigation into the quality of accounting information of the mandatory versus voluntary adopters of high-quality accounting standards encompassing both the listed and unlisted settings and the underlying determinants for the possible differences.