earticle

영어

In 2011, Korea has adopted International Financial Reporting Standards(IFRS) requiring all publicly traded firms prepare financial statements with K-IFRS. This K-IFRS adoption is expected to enhance Korean accounting practices and to promote accounting transparency, thus to decrease, so called Korea discount. Accordingly accounting quality has been the most arguing issue in many studies. as a For a proxy of accounting quality studies in this literature mostly have used earnings management based on accounting numbers. However, as Dechow et al.(1995) mentioned, the measurement of accrual-based earnings management has fundamental limitation such as model and variables misspecification arising from correlated omitted variables, resulting in quite confusing findings. This study examines the effects of K-IFRS adoption on accounting quality, using earnings transparency measures (TRANS) which introduced by Barth et al.(2013). This measure provides market-based evidence whether accounting quality has increased after adoption of IFRS. TRANS shows the explanatory power of the returns-earnings relation. We use two approaches. First, we test a relation between earnings transparency and subsequent excess returns, and second, we test a relation between earnings transparency and portfolio mean subsequent returns. We do not find evidence that K-IFRS adoption has improved accounting quality. Inversely, we find results that K-IFRS adoption decreased the explanatory power of return-earnings relation. These results imply that adoption of K-IFRS might increase managerial discretion on accounting choices, resulting in the increase of uncertainty lacking in consistency and/or comparability of accounting information. Further, adoption of K-IFRS appears to fail to provide credibility and/or reliability of accounting information at least to market participants.