코스닥소속부제와 이익조정

Abstract

KOSDAQ market reorganized their division system from two types to four types of division departments such as blue chip, venture, medium, and technology development departments in 2011. However, under the current new division system, financially unhealthy firms attempting to take advantage of the classifying opportunity of blue chip department are likely to engage in pernicious earnings management. The objective of this study is to investigate the earnings management behavior surrounding the time of KOSDAQ firms entering the blue chip department via new division system. More specifically, we test whether the firms classified blue chip department tend to engage in upward earnings management using accruals and real activities before and after they achieve blue chip status. In this study, we analyzed 111 firms classified blue chip department in 2011 according to new division system in KOSDAQ market. Major test results indicate that firms entering the blue chip department according to current KOSDAQ division system in general, tend to inflate reported earnings by means both of accruals and real activities right before the entering year. This result suggests that the firms classified blue chip department engage in opportunistic earnings management with a view to uplifting their market values. Our study is expected to provide clues useful for searching policy directions which intend to ameliorate adverse side effects of the current KOSDAQ division system. In sum, the regulatory authorities and enforcement bodies need to exercise caution in deliberating more stringent review procedures so that financially healthy and promising candidates are properly segregated from their poor and risky counterparts, thus enhancing the beneficial effects, while mitigating adverse side effects of the system.