국제다각화와 보수주의 회계와의 관련성

This study examines the relationship between international diversification and accounting conservatism in Korean firms. International diversification of a firm raises information asymmetry by increasing the complexity of operating activities. In addition, the internationally diversified firms will be exposed to greater foreign exchange translation risks or political risks of other countries. And conservative accounting, which is regarded as transparent financial reporting, prevents the opportunistic behaviour of managers for their private interests under information asymmetry between the manager and outside stakeholders. Accordingly, the internationally diversified firm’s shareholder and bondholders would request the mangers to do the conservative accounting to reduce agency costs and to protect their interests. Thus, we hypothesize that international diversification increases conservatism in financial reporting. The sample consists of 7,979 non-banking firm-years with December fiscal year end that are traded over Korea Stock Exchange from 1995 to 2013. We find that the level of corporate international diversification is positively associate with conservatism in financial statements. Specifically, we find that the asymmetric recognition of gains and losses in the current financial statements (conditional conservatism) is increasing in the level of international diversification. We also document that the greater international diversification, the more unconditional conservatism in financial statements. This study contributes to the literature by providing evidence that the level of international diversification is positively associated with accounting conservatism.