유가증권시장 부실기업의 발생액 이익조정 재고찰

This study revisits the issue of accrual-based earnings management in insolvent companies of the KOSPI Market in Korea and suggests new results. Most of the existing studies report no accrual-based earnings management at the times imminent to insolvency, which seems to suggest there are no unique incentives for insolvent companies to engage in earnings management. However, a literature review provided in this study shows that most existing studies in this area do not utilize methodologies appropriate to suggest such findings, and thus that possibly could have led to reporting no evidence favouring accrual-based earnings management in insolvent companies. In contrast, to detect the possible existence of earnings management, we adopt more advanced recent methods including the concept of discretionary accruals defined by Jones (and modified Jones model) and multiple regression technique, and find that insolvent companies do tend to manage earnings upward using accruals, up to 5 years prior to insolvency. It also has been found that this tendency becomes more evident as it is closer to the times of insolvency, with one and two years prior to insolvency showing stronger associations. In addition, we analyse if different reasons for insolvency have differing effects upon the management’s incentive to manage earnings using accruals. We find a strong evidence supporting earnings management for the cessation of operating activities while no sufficient evidence for other reasons.