해외자회사 정보를 이용한 국제다각화 측정 및 이익의 질과의 관계

This study measures the level of international diversification of Korean firms based on the detailed information on foreign subsidiaries as disclosed under the consolidated financial statements, and thereby tests for the association between the international diversification and the earnings quality including earnings volatility and earnings management. This study presents new methods for computing the degree of dispersion of corporate business activities all over the world, using the details on the location and size of foreign subsidiaries. I find that the new measures capture the multinationality of the major Korean global firms far better than the previous method based on the amount of export sales or foreign exchange assets. Further, I find that firms with higher level of international diversification have less volatile earnings and lower amount of earnings management. The results are consistent with the view that international diversification increases the portfolio hedge effect among the various sources of earnings from many countries, which results in decreasing the earnings variability and the motivation for earnings management. Consistently, the additional test result also shows that the international diversification increases the earnings persistence. This study contributes to the literature by empirically verifying the validity of new measures of international diversification using the foreign subsidiaries’ data, and clarifying the influence of international diversification on the earnings quality which was inconsistent under the previous studies.