Does Ethical Behavior of Management Influence Financial Reporting Quality?
Abstract
:1. Introduction
2. Literature Analysis and Development of Hypothesis
2.1. Managerial Ethics and Fraud Firm
2.2. The Financial Reporting Quality
2.3. Development of Research Hypothesis
3. Research Design
3.1. Proxies for Financial Reporting Quality
3.1.1. Accounting Conservatism (Khan and Watts [47]): CSCORE)
3.1.2. Discretionary Accruals (Modified Jones Model 1995; Kothari Model 2005)
3.1.3. Accruals Quality
3.2. Research Model
4. Sample and Result
4.1. Sample
4.2. Result
4.2.1. Main Result of Regression
4.2.2. Additional Analysis
4.2.3. Robustness Check
5. Conclusions
Author Contributions
Funding
Conflicts of Interest
References
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Panel A: Distribution of Fraud Firms by Year in Korea | ||||||||
Year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 |
Frequency | 23 | 16 | 37 | 64 | 38 | 20 | 23 | 22 |
Panel B: Distribution of Fraud Firms by Stock Market Type in Korea | ||||||||
Market | Frequency | |||||||
KOSPI | 56 | |||||||
KOSDAQ | 187 | |||||||
TOTAL | 243 |
Variable | Obs | Mean | Std. Dev. | Min | Max |
---|---|---|---|---|---|
12,341 | 0.326 | 0.678 | −24.547 | 6.315 | |
14,155 | 0.148 | 0.256 | 0.000 | 8.084 | |
14,155 | 0.144 | 0.254 | 0.000 | 8.092 | |
12,799 | −0.138 | 0.211 | −5.551 | 0.000 | |
14,361 | 0.028 | 0.269 | −18.207 | 8.258 | |
14,361 | 8.027 | 0.642 | 4.072 | 11.125 | |
14,361 | 0.486 | 3.497 | 0.001 | 346.803 | |
12,483 | 1.416 | 9.188 | −878.482 | 192.819 | |
12,483 | 0.076 | 0.847 | −10.565 | 31.845 | |
14,361 | −0.053 | 1.265 | −137.182 | 10.979 | |
14,155 | 0.671 | 55.414 | −0.996 | 6590.844 |
Main Regression (Column 1) | 2SLS (Column 2) | |||||||
---|---|---|---|---|---|---|---|---|
PooledREG | MatchedREG | PooledREG | MatchedREG | |||||
CSCORE | Coef. | T-Value | Coef. | T-Value | Coef. | T-Value | Coef. | T-Value |
−0.012 | −0.590 | 0.012 | 0.380 | 0.319 | 2.370 | 0.800 | 2.600 | |
−0.134 | −9.010 | −0.076 | −1.930 | −0.223 | −13.490 | −0.067 | −1.690 | |
−0.957 | −162.630 | −0.774 | −20.070 | −0.952 | −146.730 | −0.756 | −19.390 | |
0.143 | 13.400 | −0.030 | −0.770 | 0.221 | 18.250 | −0.031 | −0.790 | |
0.025 | 89.050 | 0.025 | 23.930 | 0.025 | 90.820 | 0.026 | 24.670 | |
0.091 | 21.380 | 0.044 | 2.480 | 0.100 | 21.170 | 0.047 | 2.580 | |
0.243 | 28.750 | 0.169 | 7.150 | 0.266 | 29.250 | 0.161 | 6.710 | |
0.010 | 5.750 | 0.054 | 3.040 | 0.009 | 5.020 | 0.065 | 3.070 | |
−0.057 | −9.550 | −0.086 | −2.220 | −0.050 | −7.630 | −0.083 | −2.080 | |
0.064 | 5.310 | 0.017 | 0.490 | 0.064 | 4.590 | 0.003 | 0.080 | |
0.150 | 10.900 | 0.045 | 1.230 | 0.186 | 12.100 | 0.076 | 1.890 | |
InudsD | Included | Included | Included | Included | ||||
YearD | Included | Included | Included | Included | ||||
F-value | 2024.010 | 81.380 | 1868.36 | 80.25 | ||||
Adj R-squared | 0.826 | 0.843 | 0.827 | 0.848 | ||||
Number of obs | 11,939 | 405 | 10,545 | 370 |
Panel A: Discretionary Accruals by Jones Model and Kothari Model. | ||||||||
AbsJMDA (Column 1) | AbsKODA (Column 2) | |||||||
PooledREG | MatchedREG | PooledREG | MatchedREG | |||||
Coef. | T-Value | Coef. | T-Value | Coef. | T-Value | Coef. | T-Value | |
0.134 | 9.040 | 0.092 | 2.020 | 0.139 | 9.340 | 0.092 | 2.000 | |
0.273 | 24.530 | 0.301 | 5.290 | 0.263 | 23.590 | 0.289 | 5.020 | |
0.022 | 2.760 | −0.047 | −0.570 | 0.022 | 2.670 | −0.038 | −0.460 | |
0.028 | 3.460 | 0.114 | 1.960 | 0.035 | 4.240 | 0.134 | 2.270 | |
−0.001 | −2.670 | 0.000 | −0.130 | −0.001 | −2.290 | 0.000 | −0.040 | |
−0.013 | −4.020 | −0.056 | −2.120 | −0.012 | −3.540 | −0.059 | −2.210 | |
−0.264 | −42.300 | −0.245 | −6.870 | −0.250 | −39.970 | −0.229 | −6.360 | |
0.034 | 25.910 | 0.219 | 8.950 | 0.032 | 24.540 | 0.222 | 9.010 | |
−0.011 | −2.370 | 0.058 | 1.010 | −0.010 | −2.290 | 0.054 | 0.930 | |
0.038 | 5.500 | 0.029 | 0.380 | 0.037 | 5.310 | 0.038 | 0.490 | |
−0.203 | −19.650 | −0.260 | −4.870 | −0.217 | −21.030 | −0.263 | −4.870 | |
InudsD | Included | Included | Included | Included | ||||
YearD | Included | Included | Included | Included | ||||
F-value | 210.090 | 16.620 | 200.920 | 15.970 | ||||
Adj R-squared | 0.329 | 0.511 | 0.319 | 0.500 | ||||
Number of obs | 11,939 | 405 | 11,939 | 405 | ||||
Panel B: Discretionary Accruals by Jones Model and Kothari Model with 2SLS Method | ||||||||
AbsJMDA (Column 1) | AbsKODA (Column 2) | |||||||
PooledREG | MatchedREG | PooledREG | MatchedREG | |||||
Coef. | T-Value | Coef. | T-Value | Coef. | T-Value | Coef. | T-Value | |
0.587 | 6.280 | 1.018 | 2.430 | 0.539 | 5.760 | 0.929 | 2.170 | |
0.297 | 26.410 | 0.288 | 5.570 | 0.286 | 25.400 | 0.276 | 5.230 | |
0.026 | 3.260 | −0.024 | −0.310 | 0.024 | 3.100 | −0.017 | −0.220 | |
0.040 | 4.710 | 0.107 | 2.000 | 0.047 | 5.570 | 0.126 | 2.310 | |
0.000 | −1.920 | 0.001 | 0.400 | 0.000 | −1.570 | 0.001 | 0.420 | |
−0.018 | −5.510 | −0.082 | −3.320 | −0.016 | −4.840 | −0.085 | −3.410 | |
−0.268 | −44.110 | −0.217 | −6.560 | −0.254 | −41.830 | −0.204 | −6.050 | |
0.027 | 22.580 | 0.193 | 7.100 | 0.025 | 21.220 | 0.200 | 7.210 | |
−0.003 | −0.720 | 0.010 | 0.170 | −0.003 | −0.730 | 0.010 | 0.190 | |
0.032 | 4.770 | −0.007 | −0.090 | 0.031 | 4.590 | 0.006 | 0.080 | |
−0.188 | −17.810 | −0.125 | −2.310 | −0.207 | −19.640 | −0.131 | −2.370 | |
InudsD | Included | Included | Included | Included | ||||
YearD | Included | Included | Included | Included | ||||
F-value | 232.940 | 15.150 | 222.170 | 14.25 | ||||
Adj R-squared | 0.373 | 0.499 | 0.362 | 0.4829 | ||||
Number of obs | 10,545 | 370 | 10,545 | 370 |
Main Regression (Column 1) | 2SLS (Column 2) | |||||||
---|---|---|---|---|---|---|---|---|
PooledREG | MatchedREG | PooledREG | MatchedREG | |||||
AccQual | Coef. | T-Value | Coef. | T-Value | Coef. | T-Value | Coef. | T-Value |
−0.115 | −8.860 | −0.055 | −1.290 | −1.178 | −13.990 | −1.274 | −3.090 | |
0.122 | 12.330 | 0.107 | 1.940 | 0.146 | 14.030 | 0.087 | 1.640 | |
0.115 | 16.630 | 0.259 | 3.400 | 0.101 | 14.340 | 0.249 | 3.330 | |
−0.026 | −3.620 | 0.082 | 1.500 | −0.054 | −6.990 | 0.052 | 0.970 | |
−0.002 | −8.410 | −0.001 | −0.320 | −0.002 | −9.730 | −0.003 | −1.270 | |
0.012 | 4.230 | 0.015 | 0.600 | 0.012 | 4.050 | 0.018 | 0.720 | |
−0.057 | −9.940 | −0.046 | −1.310 | −0.080 | −13.570 | −0.046 | −1.340 | |
−0.004 | −3.500 | −0.062 | −2.500 | −0.002 | −2.040 | −0.071 | −2.490 | |
0.029 | 7.260 | 0.070 | 1.300 | 0.015 | 3.590 | 0.070 | 1.310 | |
−0.165 | −21.030 | −0.225 | −4.870 | −0.171 | −19.640 | −0.123 | −2.370 | |
0.066 | 10.900 | 0.088 | 1.230 | 0.074 | 12.100 | 0.137 | 1.890 | |
InudsD | Included | Included | Included | Included | ||||
YearD | Included | Included | Included | Included | ||||
F-value | 108.520 | 5.990 | 116.500 | 4.550 | ||||
Adj R-squared | 0.201 | 0.250 | 0.228 | 0.200 | ||||
Number of obs | 11,939 | 405 | 10,545 | 370 |
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Im, C.; Nam, G. Does Ethical Behavior of Management Influence Financial Reporting Quality? Sustainability 2019, 11, 5765. https://doi.org/10.3390/su11205765
Im C, Nam G. Does Ethical Behavior of Management Influence Financial Reporting Quality? Sustainability. 2019; 11(20):5765. https://doi.org/10.3390/su11205765
Chicago/Turabian StyleIm, Chaechang, and Giseok Nam. 2019. "Does Ethical Behavior of Management Influence Financial Reporting Quality?" Sustainability 11, no. 20: 5765. https://doi.org/10.3390/su11205765