기업의 위치와 재무제표의 비교가능성

This study examines the effect of firms’ geographic locations on their financial statements comparability. We argue that whether a firm is located in metropolitan area or not can have an impact on the firm’s financial statement comparability. There are two different perspectives regarding the linkage between firm location and financial statement comparability based on prior literature. One is the monitoring perspective. When a firm is located in a metropolitan area, the firm’s geographic proximity to outside stakeholders can reduce the costs of obtaining information on the firm. Thus information asymmetry is reduced. Because of this reduced information asymmetry, outside stakeholders including investors can more directly monitor the management’s behavior, leading to increased financial statement comparability. The other is the market pressure perspective. Firms located in metropolitan areas are likely to grab more attention from investors and analysts compared to firms that are not. Since the attention of investors and analysts can put excess pressure on managers of firms in metropolitan areas, manager of these firms can have more incentive to act opportunistically (e.g. manage earnings) to meet the market expectation. And to hide their opportunistic behavior, managers will have very little incentive to increase the comparability of their financial statements. For the analyses, we used 14,199 firm-year observations from companies listed in the Korean stock market from year 2004 to 2016, and firm location is measured by an indicator variable representing whether the firm's headquarter is located in the Seoul metropolitan area or not. We find that firms located in the Seoul metropolitan area are more likely to report financial statements with high comparability, compared to firms that are not. These findings suggest that the monitoring effects dominate the market pressure effects. These findings are robust even after using alternative measures for firm location proxy and addressing endogeneity. Overall, we document the evidence of how a firm’s geographic proximity to outside stakeholders generates a monitoring effect, and thus leads to increased financial statement comparability. Our findings contribute to accounting literature since accounting research on firm location is relatively rare, especially those based on Korean evidence. We also contribute to the literature on financial statement comparability. By using measures developed by DeFranco et al.(2011), our study will help improve our understanding on how such measure of financial statement comparability is used. Finally, our findings show that firm location influences information asymmetry between the manager and the outside stakeholders, and as a result, has impact on firms’ behavior. Our study should interest regulators, auditors, and investors by suggesting that they should pay more attention to firms not located in metropolitan areas when monitoring them.