우회상장 기업의 이익조정과 상장이후 기업성과

This paper investigates whether “pearl” which is an unlisted firm to acquire a listed firm or “shell” company boosts reported earnings through discretionary accruals in order to obtain private benefit from a backdoor listing. An unique characteristic of the backdoor listing is to integrates aspects of both IPO and M&A. Previous studies on earings management in IPOs and M&As document that they increase net income intentionally prior to the events, giving them cost reduction from high issue price of new shares. Pearl company has also a motive to manage reported earnings upwardly to get the benefit. Previous researches demonstrate that severer under-performance follows backdoor listing than IPO, caused by high information asymmetry and poor corporate governance etc. This paper concentrates on earnings manipulation of pearl firms and the effect of earnings management on post-listing performance. We conduct an empirical analysis with 70 backdoor and 194 regular listing(IPO) events from July 2006 to June 2010 in the KOSDAQ market. The extent of earnings manipulation is measured by modified Jones model which is the most popular model. Pearl is more likely to inflate earnings via discretionary accruals because unlisted firms through backdoor listing have weak corporate governance and high information asymmetry. Higher degree of earnings management of Pearl is consistent with previous empirical results. Second, several metrics such as BHAR, ROA, ROS, GRW, and LEV are measured in order to explore overall change of pearl and IPO firms surrounding listing year. There are four types of backdoor listing in Korea. Only type of merger is adopted for the analysis because pearl and shell firm merged into one combined firm. Buy and hold abnormal return for a stock market performance is measured as buy and hold return of a sample firm less that of KOSDAQ market. KOSDAQ index is proxy variable for KOSDAQ market. ROA represents return over total assets(net income/total assets). ROS represents return on sales(net income/sales). GRW is growth in total assets. LEV is calculated total liabilities over total assets. M&A firm shows the decline in ROA and ROS at the year of backdoor listing, not long-lasting. LEV of M&A firm rises at the year of backdoor listing and high level of LEV is held following the year. The growth in total assets improves at the year of M&A and decreases the next year. These empirical results imply that the expected M&A synergy through backdoor listing is not realized. Third, this paper examines the effect of pre-earnings management of pearl on post-listing performance. Both operating performance and stock market performance are adopted as a proxy variable as financial performance. Under-performance in long-run stock return and accounting rates of return exists clearly. Using one-year BHAR and ROA(-1,0) as the dependent variables, we run OLS regression analyses. No empirical results are found supporting significant association between earnings manipulation and post-listing financial performance. This might suggest the possibility of that market responds rapidly to the discretionary accruals. CAR measured by market adjusted model is adopted to measure short-run market reaction. High positive excess return is observed around the disclosure date of backdoor listing, which is derived from the expectation of maintenance of list status and synergy from combining pearl and shell. Positive market reaction is changed to be negative at the designated date following the announcement date. One of reasons of negative excess return is the overreaction to the announcement to backdoor listing. Both excess returns for the disclosure date and the designated date have no significant relationship with discretionary accruals of pearl, implying market fails to recognize the extent of earnings manipulation of pearl at those time. Lastly, what makes more backdoor-listed firms delisted than IPOs? Actually, a comparison of backdoor-listing and regular listing demonstrates that backdoor-listed company becomes insolvent shortly after listing. The analysis on survival determinants of reverse mergers reduces survival bias through including delisted firms. Net income of both pearl and shell firms is a significant factor for dysfunction of backdoor listing. It is a meaningful evidence for the regulation of backdoor listing in Korea.