Abstract

K－IFRS has been adopted in Korea to increase accounting transparency and usefulness of accounting information. Therefore, opportunistic earnings management can be reduced with K－ IFRS based on accounting transparency. However, K－IFRS is principle－based, evaluates assets and liabilities as the fair value. These can increase the management's discretion on earnings management. Thus, the adoption of K－IFRS can increase opportunistic earnings management. Accordingly the effects of adoption of K－IFRS on the quality of earnings is a matter of empirical question. Previous studies suggest that the firm’s earnings management can be discriminately affected by being listed on the KOSPI or KOSDAQ market, firms’s size, type of auditor and debt －to－equity ratio depending on the characteristics of firms. Therefore, in the present study, we selected total 5,618 firm/years from 2008 to 2013 as the samples, targeting non－financial companies of December 31 fiscal year－end listed on the KOSPI and KOSDAQ of the 2013 year －end and have done an empirical analysis whether the adoption of K－IFRS affects the quality of earnings and the effects of K－IRFS is additionally associated with firm’s characteristics. The main empirical results of this study are as follows. First, adoption of K－IFRS significantly decreased discretionary accruals and real earnings management, indicating the quality of earnings was improved than before with increment of accounting transparency and usefulness since the adoption of K－IFRS. Second, the effect of K－IRFS adoption on the earnings management can be affected by firm’s characteristics. In this study, contributions of points are as follows. First, it expanded the scope of previous studies. This study analyzed from 2011 to 2013 when K－IFRS has been adopted demonstrating empirical analysis about full－scale impact on its earnings management whereas previous studies analyzed the companies voluntarily adopted K－IFRS. In addition, this study is more stably enhancing validity of research by expanding period of analysis in 2012 and 2013 compared to previous studies that only analyzed 2011 since K－IFRS has been mandatorily adopted. Second, this study empirically analyzed differential effect of K－IFRS adoption on the quality of earnings depending on characteristics of the companies respectively. It also is differentiated from previous studies.

Keywords

• IFRS
• Discretionary Accruals
• Real Earnings Management
• Big4 Auditor
• Debt Ratio

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