The Effect of COVID-19 on Public and Private Sector Earnings Management: Evidence from Korea

Woo-sahng Kim, Bo-young Moon () and Dong-goo Jung
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Woo-sahng Kim: Graduate School of Business, Dankook University, 152 Suji-gu Juckjeon-ro, Yongin-si 16890, Kyunggi-do, Republic of Korea
Bo-young Moon: Business Administration, Dankook University, 152 Suji-gu Juckjeon-ro, Yongin-si 16890, Kyunggi-do, Republic of Korea
Dong-goo Jung: Graduate School of Business, Dankook University, 152 Suji-gu Juckjeon-ro, Yongin-si 16890, Kyunggi-do, Republic of Korea

IJFS, 2024, vol. 12, issue 2, 1-12

Abstract: This study investigated how the COVID-19 pandemic impacted earnings management practices within both public and private firms in Korea. Amid active government efforts and policies to overcome the pandemic crisis, we anticipate that the earnings management of public sector managers, prioritizing public benefit as their key sustainability objective, will distinctly differ from those of private sector managers, who are influenced by a different set of pressures and incentives. Empirical analysis revealed a notable decrease in earnings management in the public sector post-COVID-19, with no significant change in the private sector. Our study distinguishes how public and private firms react to identical economic crises, deepening our insight into the ways different organizations handle financial reporting amid government intervention and economic stress. Such differentiation not only broadens our comprehension of strategies for managing earnings but also offers vital perspectives on the dynamics among corporate governance, regulatory environments, and sustainability.

Keywords: earnings management; COVID-19 crisis; reporting quality; government policy; public sector; private sector; sustainability (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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