경영자 과신성향과 MD&A 비정상적 기술

[Purpose]This study investigates how managerial overconfidence affects the abnormal description in Management Discussion and Analysis (MD&A) and examines whether this relationship differs depending on the level of external monitoring and internal governance mechanisms. [Methodology]The sample consists of publicly listed companies in South Korea from 2012 to 2019. Abnormal textual modifications in MD&A are measured using a text analysis approach. Managerial overconfidence is measured based on the sum of financial activity－related indicators, following the method suggested by Schrand and Zechman (2012). The study further analyzes how this relationship varies across firms with different levels of foreign ownership and board independence, representing external monitoring and internal control, respectively. [Findings]The results show that overconfident managers are more likely to engage in abnormal descriptions in MD&A, indicating a tendency to excessively revise or repeat information in disclosures. However, this tendency is less pronounced in firms with high levels of foreign ownership and board independence, suggesting that managerial disclosure behavior varies depending on firm characteristics. [Implications]Since managerial overconfidence can undermine the credibility of MD&A disclosures, effective monitoring and regulatory oversight are necessary. Regulatory bodies should strengthen the criteria for evaluating the quality of MD&A disclosures and reinforce external monitoring systems to enhance investor protection. Firms are also encouraged to recognize the importance of foreign investors and independent board composition to improve the objectivity and reliability of their disclosures.