The value relevance of accounting information around the 1997 Asian financial crisis—the case of South Korea

Ho, Li-Chin Jennifer; Liu, Chao‐Shin; Sohn, Pyung Sik

doi:10.1080/16081625.2001.10510591

Cited by 31 publications

(21 citation statements)

References 18 publications

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“…Ho et al. () show that cash flows become more value relevant around the 1997 Asian financial crisis. The following regression analysis is performed to assess the incremental explanatory power of earnings versus cash flows.…”

Section: Resultsmentioning

confidence: 99%

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐IFRS Periods: Evidence from China

Liao

Taylor

2015

Financ Manag Account

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The purpose of this study is to investigate the prevalence of both accrual-and activities-based earnings management for Chinese A-share firms surrounding the adoption of substantially IFRS-convergent accounting standards. Since 2007, all listed A-share firms in China have been required to comply with a new set of accounting standards that have substantially conformed to IFRS. The new reform also produced a set of new auditing standards and internal control reporting requirements. Based on a sample of 4,050 firm-year observations from 2002 to 2011, we find that Chinese firms in the post-IFRS period (2007)(2008)(2009)(2010)(2011) are less likely to engage in accrual-based earnings management. The magnitude of discretionary accruals also declines after IFRS adoption. In response, we see firms turning to real activities manipulation as a substitute for upward earnings management. The reduction in accrual-based earnings management could stem from higher quality accounting standards associated with IFRS adoption and/or concurrent changes in the governance regimes introduced with the IFRS mandate. A further analysis, however, indicates that the benefits of IFRS adoption in curbing upward accrual-based earnings manipulation are not evenly distributed across firms. Specifically, the benefit diminishes for firms that are controlled by Chinese central or local governments, are located in less developed regions, and that have weak financial performance and therefore subject to delisting status. We also find that The authors appreciate the valuable comments provided by the benefit is less pronounced for manufacturing firms than for their non-manufacturing counterparts.

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Section: Resultsmentioning

confidence: 99%

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐IFRS Periods: Evidence from China

Liao

Taylor

2015

Financ Manag Account

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“…They showed that the accounting system affect the extent of changes in the value relevance of book value resulting from the crisis. The results of Ho et al (2001), indicate that the value relevance of accounting earnings for Korean firms significantly declines from the pre-crisis (1995)(1996) to the in crisis (1997)(1998) period.…”

Section: Background and Questions Researchmentioning

confidence: 97%

Value relevance of accounting data and financial crisis in Europe: an empirical analysis

Devalle

2012

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This paper aims at verifying the relationship between book value and market value for a four years period (2006)(2007)(2008)(2009) in Europe, under IFRS. In particular, I used value relevance approach to measure whether net income or comprehensive income is more useful to understand the relationship between market data and financial data. Moreover, the paper analyzes the impact of financial crisis on the value relevance of accounting data. The examination period runs from a pre-crisis period (2006)(2007) to an in-crisis period (2008)(2009). Results shows that comprehensive income is more value relevant than net income. Furthermore, the financial crisis has a positive impact on value relevance.

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“…This requirement directed financial institutions and large firms with assets exceeding KRW 2 trillion to hire outside directors to account for more than half of all board members (Chang, Choi, and Shin 2007). Ho, Liu, and Sohn (2001) report that the value relevance of accounting earnings for Korean firms declined from the pre-crisis period to the in-crisis period, but Chang, Choi, and Shin (2007) find that the problem of information asymmetry in Korean firms was mitigated after the financial crisis, suggesting some improvements in the transparency of Korean firms. Park (2005) reports a significant improvement in earnings timeliness after the Korean financial crisis of 1997, suggesting that Korea's accounting reforms after the financial crisis successfully increased conservatism in recognition of economic losses and enhanced the transparency of firms' financial statements.…”

Section: The Asian Financial Crisismentioning

confidence: 99%

Changes in chaebol firms’ overinvestment after the Asian financial crisis: a long-term perspective

Jaimin

Choi

Cho

2014

Asia-Pacific Journal of Accounting & Economics

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This paper examines chaebol firms' overinvestment practices before and after a financial crisis in Korea. In comparison to non-chaebol firms, chaebol firms significantly reduced overinvestment after the Asian financial crisis. Also, chaebol firms were less inclined to engage in earnings management for overinvestment after the financial crisis. The results suggest that governance and financial reforms focusing on chaebol firms and emphasizing long-term firm value after the crisis discouraged chaebol firms' overinvestment practices, bringing about a sharp rebound in their business performance.

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The value relevance of accounting information around the 1997 Asian financial crisis—the case of South Korea

Cited by 31 publications

References 18 publications

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐IFRS Periods: Evidence from China

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐IFRS Periods: Evidence from China

Value relevance of accounting data and financial crisis in Europe: an empirical analysis

Changes in chaebol firms’ overinvestment after the Asian financial crisis: a long-term perspective

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