Shareholders' Stock－Pledged Loans and Financial Disclosure Strategies: Evidence Based on Accounting Conservatism

Abstract

[Purpose]This study analyzes the relationship between shareholders' stock－pledged loans and managers' financial disclosure strategies by examining changes in the level of accounting conservatism. Furthermore, it investigates the differences in results between Chaebol firms and Non－Chaebol firms in terms of the level of external monitoring. [Methodology]An analysis of companies listed on the KOSPI and KOSDAQ markets from 2011 to 2022 was conducted. To test the hypotheses, both univariate analysis and regression analysis were employed. [Findings]The findings revealed a tendency for firms with stock－pledged loans or larger amounts of such loans to show improved accounting conservatism. This finding was consistent among Non－Chaebol firms. however, Chaebol firms did not demonstrate an improvement in accounting conservatism as a result of stock pledging. The findings remained consistent even when alternative measures of conservatism and the complexity of ownership structures were considered. [Implications]This research contributes academically by shedding light on the financial disclosure strategies of firms with stock－pledged loans and highlighting how differences in such strategies between Chaebol and Non－Chaebol firms may stem from varying responses to external monitoring. Moreover, it provides practical implications by emphasizing that accounting information in Chaebol firms with stock－pledged loans tends to be relatively opaque.