Real Earnings Management, Firm Value, and Corporate Governance: Evidence from the Korean Market
Round 1
Reviewer 1 Report
- Why do the datasets cover the 2003-2011 period? Can you obtain data from recent years?
- Why is the focus on Korea? How is it different from other countries?
- Limitations and future research directions are missing;
- P.1, line 1, page number of the EM definition quotation is required.
Author Response
Reviewer#1, Concern #1: Why do the datasets cover the 2003-2011 period? Can you obtain data from recent years?
=> Thank you very much for your suggestion. We included the limitations to obtain recent database in the section 3.3. (see pp. 9-10).
Reviewer#1, Concern #2: Why is the focus on Korea? How is it different from other countries?
=> Thank you very much for your suggestion. We included the reasons for choosing Korea in the study in the section 3.3. (see p. 10).
Reviewer#1, Concern #3: Limitations and future research directions are missing.
=> Thank you very much for your suggestion. We included the limitations and future research directions in the conclusion section (see p. 21).
Reviewer#1, Concern #4: P.1, line 1, page number of the EM definition quotation is required.
=> Thank you very much for your suggestion. We included the page number in the quotation (see p. 1).
Reviewer 2 Report
Thank you for an interesting paper that provides insights into how appropriate CG can impact and improve board oversight resulting in increased transparency and disclosure.
I have reviewed your paper from the standpoint of Corporate Governance law as I am not a statistician and cannot evaluate that aspect.
It was interesting to list how internal managers can manipulate reports of firm's performance - this is an important topic for the role of the board and the value that independent directors bring to the table.
I suggest you introduce the issue of the emerging topic of reporting of non-financial information relating to intangibles. It seems to me that this is the type of information ripe for manipulation in the information, data and technology age. A couple of paragraphs with your thoughts, that may be derived from your statistical evidence would enrich your analysis as this is very topical.
I would like to get a sense of which areas create the most internal conflict between internal managers/ directors and the company's performance as you seem to make general conclusions. Is it possible to evaluate the riskier areas?
At page 13 you refer to CG policies - again quite a general statement - are you able to be more specific as to which CG policies are more likely to improve financial reporting for example?
In other words, on the whole I suggest you please include slightly more detailed discussion of how the statistical analysis impacts CG decision-making. For example, can you suggest whether introducing particular genre of policies and actions will improve financial reporting, especially of non-financial information? In that sense, my suggestions are not major revisions, rather would require a fuller development of the statements relating to CG.
Finally, it would be helpful to readers to better align your introduction with your conclusions. Also, I suggest you give the reader a better sense of how your paper and research has advanced knowledge in this field.
Author Response
Reviewer#2, Concern #1: It was interesting to list how internal managers can manipulate reports of firm's performance - this is an important topic for the role of the board and the value that independent directors bring to the table.
=> Thank you very much for your suggestion. We included specific ways to manipulate financial reports by internal managers in the section 2.1 (see pp. 3-4).
Reviewer#2, Concern #2: I suggest you introduce the issue of the emerging topic of reporting of non-financial information relating to intangibles. It seems to me that this is the type of information ripe for manipulation in the information, data and technology age. A couple of paragraphs with your thoughts, that may be derived from your statistical evidence would enrich your analysis as this is very topical.
=> Thank you very much for your suggestion. We included the importance of non-financial information and intangible assets in the valuation of a firm in the section 4.3.4 (see p. 19).
Reviewer#2, Concern #3: I would like to get a sense of which areas create the most internal conflict between internal managers/ directors and the company's performance as you seem to make general conclusions. Is it possible to evaluate the riskier areas?
=> Thank you very much for your suggestion. We included some examples of conflict of interest and mentioned that conflict of interest is presented in all firm’s areas. Please review section 2.1. (see pp. 3-4).
Reviewer#2, Concern #4: At page 13 you refer to CG policies - again quite a general statement - are you able to be more specific as to which CG policies are more likely to improve financial reporting for example?
=> Thank you very much for your suggestion. We included some examples of CG policies that improve the financial reporting standards. Please review section 4.3.2. (see pp. 13-14).
Reviewer#2, Concern #5: In other words, on the whole I suggest you please include slightly more detailed discussion of how the statistical analysis impacts CG decision-making. For example, can you suggest whether introducing particular genre of policies and actions will improve financial reporting, especially of non-financial information? In that sense, my suggestions are not major revisions, rather would require a fuller development of the statements relating to CG.
=> Thank you very much for your suggestion. We included some examples of CG policies that improve the financial reporting standards. Please review section 4.3.2. (see pp. 13-14).
Reviewer#2, Concern #6: Finally, it would be helpful to readers to better align your introduction with your conclusions. Also, I suggest you give the reader a better sense of how your paper and research has advanced knowledge in this field.
=> Thank you very much for your suggestion. We included detailed contribution of our paper in the introduction section (see p. 3).
Reviewer 3 Report
Congratulations on a very interesting article. I highly rate the substantive and methodological value of the article. The hypotheses were derived from theory and properly verified.
However, the article lacks a separate Discussion section. The authors to a very limited extent referred the obtained results to the results of other researchers.
The conclusion does not have all the required elements, such as (a) recommendations and implications, (b) research limitations, (c) suggestions for further studies.
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Author Response
Reviewer#3, Concern #1: Congratulations on a very interesting article. I highly rate the substantive and methodological value of the article. The hypotheses were derived from theory and properly verified.
However, the article lacks a separate Discussion section. The authors to a very limited extent referred the obtained results to the results of other researchers.
=> Thank you very much for your suggestion. We included detailed contribution of our paper in the introduction section (see p. 3).
=> We do not include discussion section separately because we analyzed our results on section 4. Please review our new analysis in section 4 (see pp. 10-19).
Reviewer#3, Concern #2: The conclusion does not have all the required elements, such as (a) recommendations and implications, (b) research limitations, (c) suggestions for further studies.
=> Thank you very much for your suggestion. We included recommendations, implications, limitations and future research directions in the conclusion section (see p. 20).
