Academic Activities
[Research]The Value-relevance of Earnings and Book Value, Ownership Structure, and Business Group Affiliation:
2007.06.07 Views 1160 경영학연구분석센터
Journal of Business Finance and Accounting
Volume 34, Issue 5-6, June/July 2007, Pages 740–766
Kee-Hong Bae,
Seok Woo Jeong Seok Woo Jeong, Professor of Accounting, Korea University Business School, 5-1 Anam-dong, Sungbuk-ku, Seoul, 136-701, Korea. e-mail: jeong@korea.ac.kr
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5957.2007.02017.x/abstract
Abstract
We investigate the quality of two primary accounting summary measures, i.e., earnings and book value, provided by firms belonging to Korean business groups (chaebols). We find that the value-relevance of earnings and book value is significantly smaller for firms affiliated with business groups. We also find that cross-equity ownership (a proxy for the agency problem between controlling and minority shareholders) negatively affects value-relevance, while foreign equity ownership (a proxy for the monitoring effect) positively affects value-relevance. This evidence is consistent with the view that the poor quality of earnings and book value provided by chaebol-affiliated firms is due to the inherently poor governance structure of chaebols.
Volume 34, Issue 5-6, June/July 2007, Pages 740–766
Kee-Hong Bae,
Seok Woo Jeong Seok Woo Jeong, Professor of Accounting, Korea University Business School, 5-1 Anam-dong, Sungbuk-ku, Seoul, 136-701, Korea. e-mail: jeong@korea.ac.kr
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5957.2007.02017.x/abstract
Abstract
We investigate the quality of two primary accounting summary measures, i.e., earnings and book value, provided by firms belonging to Korean business groups (chaebols). We find that the value-relevance of earnings and book value is significantly smaller for firms affiliated with business groups. We also find that cross-equity ownership (a proxy for the agency problem between controlling and minority shareholders) negatively affects value-relevance, while foreign equity ownership (a proxy for the monitoring effect) positively affects value-relevance. This evidence is consistent with the view that the poor quality of earnings and book value provided by chaebol-affiliated firms is due to the inherently poor governance structure of chaebols.