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

Author

Listed:
  • Abiot Tessema

    (Zayed University College of Business)

  • Moo Sung Kim

    (Zayed University College of Business)

  • Jagadish Dandu

    (Zayed University College of Business)

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.

Suggested Citation

  • Abiot Tessema & Moo Sung Kim & Jagadish Dandu, 2018. "The impact of ownership structure on earnings quality: the case of South Korea," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 15(3), pages 129-141, August.
    • Handle: RePEc:pal:ijodag:v:15:y:2018:i:3:d:10.1057_s41310-018-0039-x
    DOI: 10.1057/s41310-018-0039-x
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    References listed on IDEAS

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    Cited by:

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    2. Mohamed M. El-Dyasty & Ahmed A. Elamer, 2022. "Multiple audit mechanism, audit quality and cost of debt: empirical evidence from a developing country," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(3), pages 264-281, September.
    3. GONG, Yuanyuan & YAN, Yongjun & YANG, Nianxiang, 2021. "Does internal control quality improve earnings persistence? Evidence from China's a-share market," Finance Research Letters, Elsevier, vol. 42(C).

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    More about this item

    Keywords

    Business group; Ownership structure; Earnings quality; South Korea;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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