Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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Determinants of Difference in the Value-Earnings Convexity

가치-이익 볼록성 차이의 결정요인에 관한 연구

  • Shin-Hyoung Kwon (Department of Accounting and Tax, Hanyang University ERICA) ;
  • Hae-Rin Shim (Department of Accounting and Tax, Hanyang University ERICA)
  • 권신형 (한양대학교 ERICA 회계세무학과) ;
  • 심해린 (한양대학교 ERICA 회계세무학과)
  • Received : 2024.08.30
  • Accepted : 2024.09.25
  • Published : 2024.09.30
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Abstract

Purpose - This study aims to identify and document earnings management, sources of investment growth, and CEO personality traits as three determinants of difference in the value-earnings convexity. Design/methodology/approach - To test our hypotheses, we run cross-sectional regressions based on the Fama and Macbeth (1973) procedure using US firm-year observations from 1968 to 2017. Findings - First, we show that the value-earnings association decreases with accruals and real earnings management. Second, we demonstrate that the value-earnings convexity is weaker when investment growth is supported by off-balance-sheet intangible assets relative to on-balance-sheet tangible and intangible assets. Finally, we find that extraverted CEOs and CEOs who are more open to experience are better at exploiting the growth opportunities implied by the current accounting profitability. Conscientious and neurotic personality traits of CEOs make no difference in exploiting the growth opportunities that the current accounting profitability suggests. Research implications or Originality - This study complements and extends the literature on real options and behavioral agency by demonstrating that the value-earnings convexity depends not only on accounting profitability and investment growth rate, but also on earnings management, sources of investment growth, and CEO personality traits.

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Acknowledgement

이 논문은 2020년도 대한민국 교육부와 한국연구재단의 지원을 받아 수행된 연구임 (2020S1A5A8043626).

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