경영자의 기회주의적 실적공시 전략 및 잠정이익의 정확성

This study provides empirical analysis on the relationship between the accuracy of preliminary earnings announcement and the unexpected earnings to test for firm managers’ opportunistic behavior. Preliminary earnings announcement made in the form of Fair or Timely Disclosure, which is a critical source of information on corporate performance, can have substantial impact on investors’ decision making. Given the critical role of earnings information, firm managers may have motives to affect the market participants’ reaction in their favor by strategically determining the timing or amount of the preliminary earnings announcements. Prior research indicates that firm managers tend to employ opportunistic strategies including adjustment of disclosure timing in order to hide bad earnings news or highlight good earnings news. Further, managers can allegedly use disclosure strategy to intentionally exaggerate the amount of preliminary earnings, which can lead to serious problem such as investors’ unexpected losses. In other words, firms might adopt opportunistic strategy to distort the market reaction to preliminary earnings announcements by misrepresenting the preliminary earnings amount and later correcting the earnings amount for the regular business reporting purpose. Despite the potential issues regarding the accuracy of preliminary earnings and the firm managers’ intentional manipulation on the earnings amount, the relevant empirical study is insufficient. This study fills the gap in the literature and conduct empirical tests for the association between the change in earnings and the accuracy of preliminary earnings. This study uses wide range of samples including the quarterly preliminary earnings announcements during the period from 2011 to 2016 for Korean firms listed in KOSPI or KOSDAQ. The test results show that the estimation bias of preliminary earnings in excess of actual earnings, and the estimation error defined as the net absolute difference between the preliminary and the actual earnings, increases as the net increase of earings from prior quarter is lower. The analysis using incremental variables result in the similar conclusion that firms with decrease in unexpected earnings in comparison to the prior quarter are more likely to increase the estimation bias and error of preliminary earnings over actual earnings. The findings indicate that firms tend to adopt opportunistic strategies to distort preliminary earnings when the earnings news is bad. In particular, such strategy is more pronounced in the sample of earnings announcements via the mandatory disclosure than those through the voluntary disclosure. In addition, supplemental tests using the propensity matching scores in order to mitigate the influence from discrepancy in firm characteristics between the types of earnings announcements show similar results consistent with the main test results. Additional analysis shows that investors’ reaction to the estimation bias is not substantial when the final earnings announcement is made. This implies that the corporate behavior of announcing inaccurate preliminary earnings and later revising the earnings amount at the final disclosure is based on a rational expectation on the market response in reality. This study presents the first evidence on the opportunistic corporate behavior of adjusting the preliminary earnings amount, and thereby highlights the necessity of disclosure policy to enhance the accuracy of preliminary earnings announcement. It also suggests that investors or analysts need to evaluate the reliability of corporate disclosure on preliminary earnings paying close attention to the earnings performance trend and the disclosure behaviors.