Browse > Article
http://dx.doi.org/10.5392/JKCA.2019.19.04.423

A Study on the Liability Limitation Provision and Firms' Cost Behavior  

Rhee, Chang Seop (세종대학교 경영학부)
Woo, Sohee (우송대학교 앤디컷국제대학 글로벌비즈니스학과)
Publication Information
Abstract
This study examines the effect of the liability limitation provision (LLP) adoption on firm's cost behavior. In April 2011, Korea introduced the LLP with the purpose of improving the management efficiency by mitigating the risks caused by the manager's failure to make decisions related to business operation. However, there are concerns that the adoption of LLP may lead the manager's moral hazard, so the need for empirical research to verify the effect of the LLP adoption is emphasized. In this study, we analyze the effect of the LLP adoption empirically, focusing on the cost behavior that is affected by the manager's decision making. From the empirical result, we find that LLP adopted companies have strengthened the cost stickiness of selling, general, and administrative costs rather than non-adopted companies. This suggests that the manager of LLP adopted company makes a more active decision to consider adjusting costs in order to prepare for future recovery in sales when sales is reduced. This study presents empirical evidence to prove the policy validity of the adoption of LLP, and we expect that our results can contribute to the capital market and academia.
Keywords
Liability Limitation Provision; Cost Stickiness; Cost Behavior; Managers' Decision Making; Selling, General and Administrative Costs;
Citations & Related Records
Times Cited By KSCI : 2  (Citation Analysis)
연도 인용수 순위
1 M. C. Anderson, R. D. Banker, and S. N. Janakiraman, "Are Selling, General, and Administrative Costs 'Sticky'?," Journal of Accounting Research, Vol.31, No.1, pp.47-63, 2003.
2 김정호, "이사의 책임제한," 고려법학, 제74권, 제4호, pp.399-452, 2014.
3 김병연, "상법상 이사의 책임제한에 대한 연구," 비교사법, 제15권, 제1호, pp.237-267, 2008.
4 J. Netter and A. Poulsen, "State Corporation Laws and Shareholders: The Recent Experience," Financial Management, Vol.18, No.3, pp.29-40, 1989.   DOI
5 Y. Brook and R. K. S. Rao, "Shareholder Wealth Effects of Directors' Liability Limitation Provisions," Journal of Financial and Quantitative, Vol.29, No.3, pp.481-497, 1994.   DOI
6 이창섭, 우소희, "사회적 책임활동과 원가형태에 관한 경영자의 의사결정에 관한 연구," 한국콘텐츠학회논문지, 제18권, 제9호, pp.209-216, 2018.   DOI
7 C. H. Chen, H. Lu, and T. Sougiannis, "The Agency Problem, Corporate Governance, and the Asymmetrical Behavior fo Selling, General, and Administrative Costs," Contemporary Accounting Reserch, Vol.29, pp.252-282, 2012.   DOI
8 구정호, "이익조정 유인이 원가의 비대칭성에 미치는 영향: 적자회피 및 이익유연화, Big-Bath를 중심으로," 회계학연구, 제36권, 제1호, pp.135-177, 2011.
9 정형록, "한국제조기업의 비대칭적인 원가행태 결정요인에 관한 연구," 회계정보연구, 제25권, 제3호, pp.1-28, 2007.
10 이창섭, 우소희, 이현정, "기업의 국제다각화가 하방경직적인 원가행태에 미치는 영향," 한국산학기술학회논문지, 제19권, 제9호, pp.100-107, 2018.   DOI
11 E. Fama and M. C. Jensen, "Agency Problems and Residual Claims," Journal of Law and Economics, Vol.26, No.2, pp.327-349, 1983.   DOI
12 조정은, 유혜영, "비상장기업의 하방경직적 원가 행태에 관한 연구," 경영검토, 제32권, 제4호, pp.65-89, 2017.
13 배창현, 손성규, "이사책임감면규정 도입이 기업에 미치는 영향 - 투자와 기업가치를 중심으로 -," 경영학연구, 제47권, 제5호, pp.993-1020, 2018.
14 염지인, 손성규, 오덕교, "이사책임감면규정의 도입에 대한 주식시장반응," 회계저널, 제23권, 제2호, pp.39-71, 2014.
15 고재종, "이사의 책임제한제도에 대한 재검토," 기업법연구, 제31권, 제1호, pp.75-108, 2017.
16 S. Bhagat, J. A. Brickley, and J. L. Coles, "Managerial Indemnification and Liability Insurance: The Effect on Shareholder Wealth," Journal of Risk and Insurance, Vol.54, No.4, pp.721-736, 1987.   DOI
17 N. O'Sullivan, "The Demand for Directors' and Officers' Insurance by Large UK Companies," European Management Journal, Vol.20, No.5, pp.574-583, 2002.   DOI
18 C. Lin, M. S. Officer, and H. Zou, "Directors' and Officers' Liability Insurance and Acquisition Outcomes," Journal of Financial Economics, Vol.102, No.3, pp.507-525, 2011.   DOI
19 K. F. Li and Y. P. Liao, "Directors' and Officers' Liability Insurance and Investment Efficiency: Evidence from Taiwan," Pacific Basin Finance Journal, Vol.29, pp.18-34, 2014.   DOI