Earnings Management in South Korea: Using Tax Expenses

• 발행기관: People & Global Business Association
• 저자명: Hyun mi Ji
• 간행물 정보: 『Global Business and Finance Review』Vol.21 No.1, 24~32쪽, 전체 9쪽
• 주제분류: 경제경영 > 경영학
• 파일형태: PDF
• 발행일자: 2016.06.30

영문 초록

We expect that tax expenses will provide a last opportunity to meet an earnings target, and involve the complexity and discretion necessary for information asymmetry to persist. Hence, tax expenses are powerful settings to examine earnings management among a wide range of firms. Considering this background, we hypothesize that changes in tax expenses are related to whether firms miss their reported earnings of the previous year. We also examine the possibility and effectiveness of earnings management through tax expenses depending on the amount to be managed. Consistent with our hypothesis, we find that firms decrease the fourth quarter effective tax rate (ETR) to meet the previous year s reported earnings. However, tax expenses could be a successful tool to manage earnings, but only when unmanaged earnings are very close to a target. These results provide general evidence that tax expenses are used to manage earnings, and suggest that stricter external audit procedures for tax expenses are required to prevent self-interested discretion by managers on their firm s tax returns.

목차

ABSTRACT

Ⅰ. Introduction

Ⅱ. Background and hypothesis

Ⅲ. Research design and sample

Ⅳ. Results

Ⅴ. Conclusions

References

키워드

Earnings management Earnings target Effective tax rate Tax expenses