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Global Diversification, Real Earnings Management, and Future Performance: Evidence from Korea

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  • Seun-Young Park
  • Hyejeong Shin

Abstract

Research has generally focused on demonstrating real earnings management (REM) stemming from managerial opportunism using the agency framework. Examining a sample of firms on the Korea Composite Stock Price Index from 2011 to 2019, we explore the benefits of REM. Empirical results show a positive relationship between corporate globalization and the extent of REM, and corporate globalization mitigates the negative relationship between REM and future (operating and market) performance, observed only in firms with a low incentive to engage in REM for zero earnings. Global firms with more operational flexibility may strategically utilize REM to avoid temporary crises and perform better in the future.

Suggested Citation

  • Seun-Young Park & Hyejeong Shin, 2023. "Global Diversification, Real Earnings Management, and Future Performance: Evidence from Korea," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(9), pages 3024-3035, July.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:9:p:3024-3035
    DOI: 10.1080/1540496X.2023.2203806
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