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The impact of ownership structure on earnings quality: the case of South Korea

Abiot Tessema (), Moo Sung Kim () and Jagadish Dandu ()
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Abiot Tessema: Zayed University College of Business
Moo Sung Kim: Zayed University College of Business
Jagadish Dandu: Zayed University College of Business

International Journal of Disclosure and Governance, 2018, vol. 15, issue 3, 129-141

Abstract: Abstract This paper investigates the impact of business group ownership structure on the quality of earnings reporting using data from South Korea. In addition, we investigate the impact of ownership disparity and family ownership on earnings quality reporting. Using a self-constructed earnings quality index as a measure of earnings quality, we found that business group ownership structure is significantly associated with higher earnings quality. The result suggests that strong monitoring mechanisms introduced by the government, which are necessary for credibility in external financial markets and beneficial to business group reputation, led to increased transparency in earnings reports. We also found that disparity in ownership between control and cash flow rights in firms, as well as family ownership in group firms, was both associated with lower earnings quality.

Keywords: Business group; Ownership structure; Earnings quality; South Korea (search for similar items in EconPapers)
JEL-codes: M41 M42 M48 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1057/s41310-018-0039-x

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