ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Earning Management and Employee Safety

  • Ja-Eun, Koo Department of Accounting, The Suwon University

Asian Tax Journal Vol. 19 No. 6 (2018), pp. 193-214

Abstract

This study examines the relationship between injury rate and earnings management using individual firm’s injury rate data. Previous studies report mixed results on the relationship between injury rates and earnings management. Lee et al. (2013) argue that higher industrial injury rates increase supervisory oversight, making it more difficult for managers to manage earnings. In contrast, Caskey et al. (2017) suggested that the manager’s earnings management to achieve the target profit increases the workload of the employees, thereby increasing the injury rates of the individual companies. This study reevaluated the relationship between injury rate and earnings management using individual firm’s injury rate data and examined how audit effort affects this relationship. An analysis of 5,260 firm－year observations from 2011 to 2015 showed a positive(＋) relationship between the number of working days foregone due to injury and discretionary accruals. It means that a company with a high injury rate is more likely to manege earnings in order to prevent a decline in firm value caused by impairment of corporate reputation. Furthermore, we find that audit effort weakens the positive relationship between the injury rate and the discretionary accruals. As we know, this study is the first to examine the relationship between injury rate and earnings management using data from Korean companies. In addition, this study extends the existing research in that it examines the effect of audit effort on the relationship between individual firm’s injury rate and earnings management.

Keywords

  • injury/illness rates
  • workplace safety
  • workload
  • earning management
  • safety expenses

Related Articles

ATJ
E-SubmissionSitemapContact Us RSS

Asian Tax Journal

Address : 3F, KICPA Bldg., 12 Chungjeongro 7-gil, Seodaemun-gu, Seoul 03736, Republic of Korea

Editor-in-Chief : Prof. Wanyong Kim Editorial Office : Dept. of Finance, Accounting & Taxation, Hanyang Cyber University, 220 Wangsimni-ro, Seongdong-gu, Seoul, Republic of Korea Tel : +82-2-2290-0418 / +82-10-8664-1117 E-mail : taxresearch2@hanmail.net