IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v12y2024i2p54-d1408606.html
   My bibliography  Save this article

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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Woo-sahng Kim & Bo-young Moon & Dong-goo Jung, 2024. "The Effect of COVID-19 on Public and Private Sector Earnings Management: Evidence from Korea," IJFS, MDPI, vol. 12(2), pages 1-12, June.
    • Handle: RePEc:gam:jijfss:v:12:y:2024:i:2:p:54-:d:1408606
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/12/2/54/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/12/2/54/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    2. Fan, Joseph P.H. & Wong, T.J. & Zhang, Tianyu, 2007. "Politically connected CEOs, corporate governance, and Post-IPO performance of China's newly partially privatized firms," Journal of Financial Economics, Elsevier, vol. 84(2), pages 330-357, May.
    3. Jose Miranda-Lopez & Ivan Valdovinos-Hernandez, 2019. "The impact of the global economic crisis of 2008 on earnings quality in Mexico," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 9(3), pages 407-421, June.
    4. Emin Dinlersoz & Jeremy Greenwood & Henry Hyatt, 2017. "What Businesses Attract Unions? Unionization over the Life Cycle of U.S. Establishments," ILR Review, Cornell University, ILR School, vol. 70(3), pages 733-766, May.
    5. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tan, Youchao & Zhu, Zhenmei & Zeng, Cheng & Gao, Minghua, 2014. "Does external finance pressure affect corporate disclosure of Chinese non-state-owned enterprises?," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 212-222.
    2. Wang, Qing (Sophie) & Anderson, Hamish & Chi, Jing, 2018. "VC political connections and IPO earnings management," Emerging Markets Review, Elsevier, vol. 35(C), pages 148-163.
    3. Jianghua Zhou & Rui Wu & Jizhen Li, 2019. "More ties the merrier? Different social ties and firm innovation performance," Asia Pacific Journal of Management, Springer, vol. 36(2), pages 445-471, June.
    4. San, Ziyao & Huang, Zhizhong & Zhou, Ling & Zhou, Zejiang, 2024. "Different lies to different audiences: Tax avoidance versus earnings inflation," Emerging Markets Review, Elsevier, vol. 62(C).
    5. Jiang, Haiyan & Hu, Yuanyuan & Zhang, Honghui & Zhou, Donghua, 2018. "Benefits of Downward Earnings Management and Political Connection: Evidence from Government Subsidy and Market Pricing," The International Journal of Accounting, Elsevier, vol. 53(4), pages 255-273.
    6. Chen, Charles J.P. & Du, Jun & Su, Xijia, 2014. "A game of accounting numbers in asset pricing: Evidence from the privatization of state-owned enterprises," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(2), pages 115-129.
    7. Kuo, Jing-Ming & Ning, Lutao & Song, Xiaoqi, 2014. "The Real and Accrual-based Earnings Management Behaviors: Evidence from the Split Share Structure Reform in China," The International Journal of Accounting, Elsevier, vol. 49(1), pages 101-136.
    8. Liu, Qigui & Tang, Jinghua & Tian, Gary Gang, 2013. "Does political capital create value in the IPO market? Evidence from China," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 395-413.
    9. Zhang, Yufei & Liu, Deqiang, 2024. "China's mixed-ownership reform and SOE profitability," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 496-520.
    10. Johansson, Anders C. & Luo, Danglun & Rickne, Johanna & Zheng, Wei, 2016. "Government Intervention in the Capital Allocation Process: Firm Employment as an IPO Selection Rule in China," Stockholm School of Economics Asia Working Paper Series 2016-40, Stockholm School of Economics, Stockholm China Economic Research Institute.
    11. Carey, Peter & Liu, Li & Qu, Wen, 2017. "Voluntary corporate social responsibility reporting and financial statement auditing in China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 13(3), pages 244-262.
    12. Francesco D'Acunto & Michael Weber & Jin Xie & Michael Weber, 2019. "Punish One, Teach A Hundred: The Sobering Effect of Punishment on the Unpunished," CESifo Working Paper Series 7512, CESifo.
    13. Francesco Capalbo & Claudio Lupi & Margherita Smarra & Marco Sorrentino, 2021. "Elections and earnings management: evidence from municipally-owned entities," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(3), pages 707-730, September.
    14. Chaney, Paul K. & Faccio, Mara & Parsley, David, 2011. "The quality of accounting information in politically connected firms," Journal of Accounting and Economics, Elsevier, vol. 51(1), pages 58-76.
    15. repec:zbw:bofitp:2020_020 is not listed on IDEAS
    16. Saibal Ghosh, 2018. "Electoral Cycles and Project Outcomes," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 527-552, June.
    17. Jun Du & Xinhui Dai & Bo Yan, 2023. "The Impact of Government Participation in Ecological Championship on Heavily-Polluting Corporate Earnings Management: Evidence from China’s National Civilized City Award," Sustainability, MDPI, vol. 15(22), pages 1-27, November.
    18. Li, Xiaorong & Wang, Steven Shuye & Wang, Xue, 2019. "Trust and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 224-248.
    19. Liang, Hao & Renneboog, Luc & Sun, Sunny Li, 2015. "The political determinants of executive compensation: Evidence from an emerging economy," Emerging Markets Review, Elsevier, vol. 25(C), pages 69-91.
    20. Cao, Xiaping & Cumming, Douglas & Zhou, Sili, 2020. "State ownership and corporate innovative efficiency," Emerging Markets Review, Elsevier, vol. 44(C).
    21. Michael Firth & Chen Lin & Sonia Man-lai Wong & Xiaofeng Zhao, 2019. "Hello, is anybody there? Corporate accessibility for outside shareholders as a signal of agency problems," Review of Accounting Studies, Springer, vol. 24(4), pages 1317-1358, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijfss:v:12:y:2024:i:2:p:54-:d:1408606. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.