DOI QR코드

DOI QR Code

The Effects of Earnings Management, Related Party Transactions and ESG Management of Chaebol Firms on Corporate Performance in Korea

재벌기업의 이익조정, 관계회사 간 거래와 ESG 경영이 경영성과에 미치는 영향

  • Narantugs, Namuun (School of Business Administration, Kyungpook National University) ;
  • Liu, Yue (School of Business Administration, Kyungpook National University) ;
  • Kim, Sung-Hwan (School of Business Administration, Kyungpook National University)
  • Received : 2022.02.28
  • Accepted : 2022.03.25
  • Published : 2022.03.30

Abstract

Purpose - This study investigates the effects of earnings management, related party transactions between chaebol affiliates on earnings management and ESG score on their profitability using return on assets (ROA). Design/Methodology/Approach - We use data including ESG (Environmental, Social, and Corporate Governance) score of the Korea Corporate Governance Service(KCGS), and financial data of 10,145 firm-year observations from the Total Solution 2000 (TS 2000) and Korea Companies-Information Service (KOKOInfo), and apply the finite lagged models to investigate the long-term effects of related party transactions between chaebol affiliates of earnings management on ESG scores and corporate performance. Furthermore, to take into consideration the simultaneous mutual effects on each other of main variables, we introduce finite distributed lags of five years. Findings - First, ESG-rated firms have a higher total asset return than non-ESG-rated firms. Second, chaebol firms have a higher profitability than non-chaebol firms. Third, profit management of related party transactions between affiliates within a chaebol has a positive effect on the short-term profitability and a negative effect on the long-term profitability. Fourth, chaebol ESG firms have a lower impact on profitability due to rating up (down) than non-chaebol ESG firms. Research Implications or Originality - Based on the above results, it can be concluded that firms used related party transactions for earnings management, the effects of related party transactions change over time, and chaebol firms manipulate earnings through related party transactions and ESG scores.

Keywords

References

  1. 강형철, 박경서, 장하성(2006), "기업집단의 계열사 간 거래의 결정요인", 재무연구, 19(1), 77-118.
  2. 김용, 조재한, 송단비 (2021), "기업 ESG 경영 확대에 대한 산업정책적 접근과 시사점", 한국산업정책연구원, 112.
  3. 나영, 홍석훈 (2011), "기업규모에 따른 CSR 활동과 기업가치에 대한 실증분석", 회계학연구, 20(5), 125-160.
  4. 백정한, 최종서 (2017), "거래 상대기업의 지배주주일까 지분율을 고려한 대규모 기업집단의 내부거래가 이익조정에 미치는 영향", 디지털정책연구, 15(1), 209-216.
  5. 이정은, 김진섭(2013), "기업지배구조, 사회 및 환경평가지수와 기업가치의 관련성 분석", 회계학연구, 38, 506-545.
  6. 이상원 (2011), "사회책임투자지수의 성과분석", 금융공학연구, 10(4), 123-140. https://doi.org/10.35527/KFEDOI.2011.10.4.006
  7. 조정은, 김상일 (2013), "특수관계자 거래가 과잉투자에 미치는 영향", 국제회계학연구, 48, 381-404.
  8. 한정희 (2021), "블록체인 부동산 등기와 스마트계약", 한국정보통신학회논문지, 25(2), 286-293. https://doi.org/10.6109/JKIICE.2021.25.2.286
  9. Aguilera, R. V., D. B. Rupp, C. A. Williams, and J. Ganapathi (2007), "Putting the S Back in Corporate Social Responsibility: A Multilevel Theory of Social Change in Organizations", The Academy of Management Review, 32(3), 836-863. https://doi.org/10.5465/AMR.2007.25275678
  10. Aras, G. and D. Crowther (2008), "Governance and Sustainability: An Investigation into the Relationship between Corporate Covernance and Corporate Sustainability", Management Decision, 46(3), 433-448. https://doi.org/10.1108/00251740810863870
  11. Barnea, A. and A. Rubin (2010), "Corporate Social Responsibility as a Conflict between Shareholders", Journal of Business Ethics, 97(1), 71-86. https://doi.org/10.1007/s10551-010-0496-z
  12. Beltratti, A. (2005), "The Complementarity between Corporate Governance and Corporate Social Responsibility", The Geneva Papers on Risk and Insurance-Issues and Practice, 30(3), 373-386. https://doi.org/10.1057/palgrave.gpp.2510035
  13. Becker-Olsen, K. L., B. A. Cudmore and R. P.Hill (2006), "The Impact of Perceived Corporate Social Responsibility on Consumer Behavior", Journal of Business Research, 59(1), 46-53. https://doi.org/10.1016/j.jbusres.2005.01.001
  14. Buchanan, B., C. X. Cao and C. Chen (2018), "Corporate Social Responsibility, Firm Value, and Influential Institutional Ownership", Journal of Corporate Finance, 52, 73-95. https://doi.org/10.1016/j.jcorpfin.2018.07.004
  15. Campbell, J. L. (2007), "Why Would Corporations Behave in Socially Responsible Ways? An Institution Theory of Corporate Social Responsibility", The Academy of Management Review, 32(3), 54-65. https://doi.org/10.5465/amr.2007.25275684
  16. Chang, S. J. and U. Choi (1988), "Strategy, Structure and Performance of Korean Business Groups: A Transactions Cost Approach", The Journal of Industrial Economics, 141-158.
  17. Choi, J. P. and T. G. Cowing (1999), "Firm Behavior and Group Affiliation: the Strategic Role of Corporate Grouping for Korean Firms", Journal of Asian Economics, 10(2), 195-209. https://doi.org/10.1016/S1049-0078(99)00014-7
  18. Choi, J. S., Y. M. Kwak and C. Choe (2010), "Corporate Social Responsibility and Corporate Financial Performance: Evidence from Korea", Australian Journal of Management, 35(3), 291-311. https://doi.org/10.1177/0312896210384681
  19. Cupertino, C. M., A. L. Martinez and N. C. da Costa Jr (2015), "Earnings Manipulations by Real Activities Management and Investors' Perceptions", Research in International Business and Finance, 34, 309-323. https://doi.org/10.1016/j.ribaf.2015.02.015
  20. Del Giudice, M., E. G. Carayannis and V. Maggioni (2017), "Global Knowledge Intensive Enterprises and International Technology Transfer: Emerging Perspectives from a Quadruple Helix Environment", The Journal of Technology Transfer, 42(2), 229-235. https://doi.org/10.1007/s10961-016-9496-1
  21. Durand, R., L. Paugam and H. Stolowy (2019), "Do Investors Actually Value Sustainability Indices? Replication, Development, and New Evidence on CSR Visibility", Strategic Management Journal, 40(9), 1471-1490. https://doi.org/10.1002/smj.3035
  22. Duque-Grisales. E. and J. Aguilera-Caracuel (2021), "Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack", Journal of Business Ethics, 168(7), 315-334. https://doi.org/10.1007/s10551-019-04177-w
  23. Friedman, E., S. Johnson and T. Mitton (2003), "Propping and Tunneling", Journal of Comparative Economics, 31(4), 732-750. https://doi.org/10.1016/j.jce.2003.08.004
  24. Gimenez-Fernandez, E. M., F. D. Sandulli and M. Bogers (2020), "Unpacking Liabilities of Newness and Smallness in Innovative Start-ups: Investigating the Differences in Innovation Performance between New and Older Small Firms", Research Policy, 49(10), 104049. https://doi.org/10.1016/j.respol.2020.104049
  25. Gordon, E. A., E. Henry and D. Palia (2004), "Related Party Transactions: Associations with Corporate Governance and Firms Value", Advances in Financial Economics, 9, 1-27. https://doi.org/10.1016/S1569-3732(04)09001-2
  26. Griffin, J. J. and J. F. Mahon (1997), "The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-five Years of Incomparable Research", Business & Society, 36, 5-31. https://doi.org/10.1177/000765039703600102
  27. Han, Jae-Joon, Hyun-Jeong Kim and Jeong-Min Yu (2018), "Empirical Study on Relationship between Corporate Social Responsibility and Financial Performance in Korea", Asian Journal of Sustainability and Social Responsibility, 1, 61-76. https://doi.org/10.1186/s41180-016-0002-3
  28. Hillman, A. J. and G. D. Keim (2001), "Shareholder Value, Stakeholder Management, and Social Issues: What's the Bottom Line?", Strategic Management Journal, 22(2) 125-139.
  29. James, H. S. (1999), "Owner as Manager, Extended Horizons and the Family Firms", International Journal of the Economics of Business, 999(6), 41-56. https://doi.org/10.1080/13571519984304
  30. Johnson, S., R. La Porta, F. Lopez-De-Silanes and A. Shleifer (2000), "Tunneling", The American Economic Review, 90(2), 22-27. https://doi.org/10.1257/aer.90.2.22
  31. Jones, J. J. (1991), "Earnings Management During Important Relief Investigation", Journal of Accounting Research, 29(2), 193-228. https://doi.org/10.2307/2491047
  32. Kim, J. H. and Y. S. Woo (2008), "The Effect of Transaction to the Related-Party on the Earnings Management and the Earnings Response Coefficient", Korean Accounting Review, 33(3), 25-59.
  33. Kim, M. Ch., Y. S. Cheon. and J. Y. Lee (2010), "Insider Trading and Earnings Management", Korean Accounting Review, 35(4), 1-37.
  34. Kim, J. H. (2011), "The Effect of Transactions to Related-Party on Firms Performance", Korean Journal of Business Administration, 24(1), 569-585.
  35. Kim, Y. H. (2012), "Related Party Transactions and Firms' Value", Korean International Accounting Association, 44, 205-222.
  36. Kim, D. B., H. I. Lee and S. H. Hyun (2016), "Effects of the Magnitude of Related Party Transaction and Proportion of Receivables on the Earnings Management Behavior: Focused on the Construction Waste Disposal Industry", Korea International Accounting Association, 66, 245-282.
  37. Kothari, S. P., A. Leone and C. Wasley(2005), "Performance Matched Discretionary Accruals Measures", Journal of Accounting and Economics, 39(1), 163-197. https://doi.org/10.1016/j.jacceco.2004.11.002
  38. Luo, Xueming and C. B. Bhattacharya (2006), "Corporate Social Responsibility, Customer Satisfaction, and Market Value", Journal of Marketing, 70(4), 1-18. https://doi.org/10.1509/jmkg.70.4.001
  39. Pava, M. L. and Krausz, J. (1996), "The Association between Corporate Social-responsibility and Financial Performance: The Paradox of Social Cost", Journal of Business Ethics, 15(3), 321-357 https://doi.org/10.1007/BF00382958
  40. Park, J. I., H. W. Paik and H.-M. Chun (2015), "The Effect of Related Party Transaction on Audit Fees: Evidence from Auditor's Differentiated Response on Profit or Loss firms with Related Party Transactions", The Korean Accounting Review, 40(3), 203-255.
  41. Premti, A. (2013), "Earnings Management Prior to Initial Public Offerings and Its Effect on firms Performance: International Evidence", International Journal of Financial Research, 4(4), 10-24. https://doi.org/10.5430/ijfr.v4n3p10
  42. Raimo, N., F. Vitolla, A. Marrone and M. Rubino (2020), "The Role of Ownership Structure in Integrated Reporting Policies", Business Strategy and the Environment, 29(6), 2238-2250. https://doi.org/10.1002/bse.2498
  43. Roman, R. M., Hayibor, S. and Agle, B. R. (1999), "The Relationship Between Social and Financial Performance: Repainting a Portrait", Business and Society, 38(1), 109-125. https://doi.org/10.1177/000765039903800105
  44. Stein, J (1988), "Takeover Threats and Managerial Myopia", Journal of Political Economy, 96, 61-80. https://doi.org/10.1086/261524
  45. Surroca, J., J. A. Tribo and S. Waddock (2010), "Corporate Responsibility and Financial Performance: The Role of Intangible Resources", Strategic Management Journal, 31(5), 463-490. https://doi.org/10.1002/smj.820
  46. Surana, K., A. Singh and A. D. Sagar (2020), "Strengthening Science, Technology, and Innovation-based Incubators to Help Achieve Sustainable Development Goals: Lessons from India", Technological Forecasting and Social Change, 157, 120057. https://doi.org/10.1016/j.techfore.2020.120057
  47. Teoh, S. H., I. Welch and T. J. Wong (1998), "Earnings Management and the Long-Run Market Performance of Initial Public Offerings", Journal of Finance, 53(6), 1935-1974. https://doi.org/10.1111/0022-1082.00079
  48. Yoon, Boh-Yun, Jeong-Hwan Lee and Ryan Byun (2018), "Does ESG Performance Enhance Firm Value? Evidence from Korea", Sustainability, 10(10), 3635. https://doi.org/10.3390/su10103635