Abstract

Recent studies indicate that managers have a tendency to pursue seek private interest by using the opportunities of IPO. Also, they show that earnings management is associated with managerial ownership as the evidence of managers’ opportunistic behavior in IPO market. Domestic related studies explain that manager's opportunistic behavior may be more strengthened in IPO market of KOSDAQ than in that of KOSPI because of information asymmetry and mitigated requirement. On the other hand, many researches such as Sachs and Warner(1995) and Schleifer &Vishiny(1996) emphasize that foreign ownerships play a positive role in monitoring managerial opportunistic behavior and controling discretional accrual choice by managers. In this study, we aim to investigate whether earnings management by managers is mitigated by surveillance of foreign investors in the IPO market of KOSDAQ, in which strong motives of managerial opportunistic behavior can exist. The empirical results shows that there is inverse relation between foreign ownership and discretionary accrual though high density of managerial ownership induces high level of discretionary accrual in IPO period. It means that foreign ownership can surveil and control managerial opportunistic behavior in IPO market. This paper contributes to the accounting literature by verifying a positive role of foreign ownership in controling managerial opportunistic behavior and discretional accrual choices in IPO market. Also, It implies that stakeholder and information user of IPO company need to consider conflicting attributes of foreign ownership and managerial ownership to increase usefulness of accounting information.

Keywords

• IPOs
• Managerial ownership
• Foreign ownership
• Earnings management

Related Articles

• The Effect of the Tax Subsidy on the Trading Volume

  Hyun－Uk Jung

  23(2) 37-59

  Abstract Full Text for PDF

• Related Party Transaction and Revenue-Expense Matching

  Dong Joon Choi , Han-Sol Lee , Inkyung Yoon , Won－Wook Choi

  23(4) 85-122

  Abstract Full Text for PDF

• A Study on the Role of Institutional Investors in the Process of Corporate Innovation Activities

  Il Hang-Shin , Oh Won Jung

  22(5) 27-50

  Abstract Full Text for PDF

• The Effect of Managerial Overconfidence on the Corporate Bond Ratings

  Hyun-Uk Jung

  19(5) 55-79

  Abstract Full Text for PDF

• Transparency of Financial Reporting of Korean Chaebol: Control-Ownership Disparity and Book-Tax Income Differences

  Jeon, Bong-Geol

  14(4) 101-121

  Abstract Full Text for PDF