Browse > Article
http://dx.doi.org/10.15207/JKCS.2017.8.5.213

A Converging Approach on the Effect of KOSPI200 Index Rebalancing on Information Quality  

Chen, Ruimin (College of Business Administration, Chonnam National University)
Choi, Sungho (College of Business Administration, Chonnam National University)
Publication Information
Journal of the Korea Convergence Society / v.8, no.5, 2017 , pp. 213-221 More about this Journal
Abstract
This study empirically investigates the relation between information quality measured by accruals quality and the KOSPI200 index rebalancing. The accruals quality is used for the proxy of information quality and is estimated by employing the Francis et al. (2005) model. The result shows that there is a statistically significant difference between additions group and deletions group. The average information quality of deletions group is substantially lower than that of additions group. In addition, the regression analysis shows that the relationship between accruals quality and a dummy variable for changes in the KOSPI200 index composition is negative and statistically significant. This result implies that additions to the KOSPI200 stock index improves information quality and relieves the information risk of firm which results in the amelioration of information asymmetry. On the other hand, deletions from the KOSPI200 index result in the deterioration of information quality. These results are consistent with Merton (1987).
Keywords
information asymmetry; accruals quality; index rebalancing; additions; deletions; KOSPI20;
Citations & Related Records
Times Cited By KSCI : 6  (Citation Analysis)
연도 인용수 순위
1 R. Merton, "A simple model of capital market equilibrium with incomplete information", Journal of Finance, Vol. 42, pp. 483-510, 1987.   DOI
2 J. Peress, "The tradeoff between risk sharing and information production in financial markets", Journal of Economic Theory, 145, pp. 124-155, 2010.   DOI
3 D. Easley, M. O'Hara, "Information and the Cost of Capital," Journal of Finance, Vol. 59, pp. 1553-1583, 2004.   DOI
4 G. Kadlec, M. McConnell, "The effect of market segmentation and illiquidity on asset prices: Evidence from exchange listings," Journal of Finance, Vol. 49, pp. 611-637, 1994.   DOI
5 S. Foerster, G. Karolyi, "The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the United States," Journal of Finance, Vol. 54, pp. 981-1013, 1999.   DOI
6 M. Dechow, D. Dichev, "The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors", The Accounting Review, Vol. 77, pp. 35-59, 2002.   DOI
7 J. Francis, R. LaFond, P. Olsson, and K. Schipper, "The Market Pricing of Accruals Quality", Journal of Accounting and Economics, Vol. 39, No. 4, pp. 295-327, 2005.   DOI
8 D. Kim, Y. Qi, "Accruals Quality, Stock Returns, and Macroeconomic Conditions", The Accounting Review, Vol. 85, pp. 937-978, 2010.   DOI
9 Y. Kim, S. Choi, "A Converging Approach on the Effect of Stock Repurchases on Cost of Equity" Journal of the Korea Convergence Society, Vol. 8, pp. 225-235, 2017.   DOI
10 M. Brennan, P. Hughes, "Stock Prices and the Supply of Information", Journal of Finance, Vol. 46, pp. 1665-1691, 1991.   DOI
11 E. Dyl, W. Elliott, "The Share Price Puzzle", Journal of Business, Vol. 79, pp. 2045-2066, 2006.   DOI
12 S. Mukherji, Y. Kim, M. Walker, "The Effect of Stock Splits on the Ownership Structure of Firms", Journal of Corporate Finance, Vol. 3, pp. 167-188, 1997.   DOI
13 C. Lamoureux, P. Poon, "The Market Reaction to Stock Splits", Journal of Finance, Vol. 42, pp. 1347-1370, 1987.   DOI
14 I. Kim, J. Yun, C. Hong, "Impact of Minimum Trading Unit Reduction in the Korean Stock Market", Korean Journal of Business Administration, Vol. 22, pp. 49-69, 2009.
15 J. Ohlson, S. Penman, "Volatility Increases Subsequent to Stock Splits: An Empirical Aberration", Journal of Financial Economics, Vol. 14, pp. 251-266, 1985.   DOI
16 A. Desai, M. Nimalendran, S. Venkataraman, "Changes in Trading Activity Following Stock Splits and Their Effect on Volatility and the Adverse Information Component of the Bid-Ask Spread", Journal of Financial Research, Vol. 21, pp. 159-183, 1998.   DOI
17 J. Park, K. Kim, J. Lee, "Changes in Trading Activities Following Stock Splits: Evidence from the Korean Stock Market", Korean Journal of Financial Studies, Vol. 39, pp. 545-571, 2010.
18 J. Park, W. Yeoh, "Information Risk and Equity Premium", Korean Journal of Financial Management, Vol. 27, pp. 209-237, 2010.
19 T. Ito, R. Lyons, M. Melvin, "Is There Private Information in the FX Market? The Tokyo Experiment", Journal of Finance, Vol. 53, pp. 1111-1130, 1998.   DOI
20 G. Lee, W. Masulis, "Seasoned Equity Offerings: Quality of Accounting Information and Expected Flotation Costs", Journal of Financial Economics, Vol. 92, pp. 443-469, 2009.   DOI
21 S. Lee, "Accruals Quality and the Ability of Earnings to Predict Future Cash Flows", Korean Accounting Journal, Vol. 21, pp. 349-378, 2012.
22 K. Choi, W. Paek, "Accrual Quality based on Convertibility into Cash and Accrual Anomaly", Korean Accounting Review, Vol. 32, pp. 1-26, 2007.
23 G. Sloan, "Do Stock Prices Fully Reflect Information in Accruals and Cash Flows about Future Earnings?", The Accounting Review, Vol. 71, pp. 289-315, 1996.
24 J. Jones, "Earnings Management during Import Relief Investigations", Journal of Accounting Research, Vol. 29, pp. 193-228, 1991.   DOI
25 E. Fama, K. French, "Industry Costs of Equity", Journal of Financial Economics, Vol. 43, pp. 153-193, 1997.   DOI
26 S. Ji, "A Convergence Study on the Effect of Investor Relation on Financial Ratios", Journal of the Korea Convergence Society, Vol. 8, pp.181-186, 2017.   DOI
27 H. Oh, "A Study on the Effect of Fair Value Hierarchy upon Cost of Capital Through the Convergence of Market Risk Management and Audit Quality", Journal of the Korea Convergence Society, Vol. 6, pp. 1-8, 2015.
28 P. DaDalt, G. Gay, J. Nam, "Asymmetric Information and Corporate Derivatives Use" Journal of Futures Markets, Vol. 22, pp. 241-267, 2002.   DOI
29 H. Moon, "A Comparison of Earnings Quality Between KOSPI Firms and KOSDAQ Firms", Journal of digital Convergence , Vol. 15, No. 1, pp. 129-141, 2017.   DOI
30 M. Jensen, W. Meckling, "Theory of the Firm: Management Behavior, Agency Costs, and Ownership Structure", Journal of Financial Economics, Vol. 3, pp. 305-360, 1976.   DOI
31 J. Lee, K. Kim, "The Effects of Accounting Service Worker's Professionalism and Accounting Information System's Level on the Quality of Customer's Accounting Information," Journal of IT Convergence Society for SMB, Vol. 6, No. 3, pp. 1-6, 2016.
32 S. Choi, S. Song, "A Study on The Effect Financial Performance of Convergence Factors on Corporate", Journal of digital Convergence , Vol. 13, No. 8, pp. 123-131, 2015.   DOI
33 J. Baek, J. Choi, "The Effect of Transaction to the Related-party on the Earnings Management by considering Controlling Shareholders Ownership", Journal of digital Convergence, Vol. 15, No. 1, pp. 209-216, 2017.   DOI