{"title":"Do foreign investors make firms more transparent? Evidence from Korea","authors":"Junyong Lee , Frederick Dongchuhl Oh","doi":"10.1016/j.mulfin.2024.100860","DOIUrl":null,"url":null,"abstract":"<div><p>In this study, we investigate whether foreign equity participation enhances the level of transparency in Korean listed firms’ accounting information. Using panel data on the Korean listed firms during the 1999–2019 period, we find that foreign ownership has a positive effect on the accounting transparency of firms. This suggests that foreign investors effectively monitor the earnings management activities of a firm and contribute to increasing the quality of accounting information. In addition, this positive impact of foreign equity ownership is more pronounced in non-chaebol firms than in chaebols. We further show that foreign investors reinforce the effect of changes in accounting systems on the transparency of Korean firms. Finally, firms with enhanced transparency by foreign investors perform better in the future. Overall, our study highlights the importance of foreign investors for enhancing accounting transparency in the Korean stock market. (JEL F21, F65, G15, G30, M40)</p></div>","PeriodicalId":47268,"journal":{"name":"Journal of Multinational Financial Management","volume":"74 ","pages":"Article 100860"},"PeriodicalIF":2.9000,"publicationDate":"2024-05-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Multinational Financial Management","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042444X24000252","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
In this study, we investigate whether foreign equity participation enhances the level of transparency in Korean listed firms’ accounting information. Using panel data on the Korean listed firms during the 1999–2019 period, we find that foreign ownership has a positive effect on the accounting transparency of firms. This suggests that foreign investors effectively monitor the earnings management activities of a firm and contribute to increasing the quality of accounting information. In addition, this positive impact of foreign equity ownership is more pronounced in non-chaebol firms than in chaebols. We further show that foreign investors reinforce the effect of changes in accounting systems on the transparency of Korean firms. Finally, firms with enhanced transparency by foreign investors perform better in the future. Overall, our study highlights the importance of foreign investors for enhancing accounting transparency in the Korean stock market. (JEL F21, F65, G15, G30, M40)
期刊介绍:
International trade, financing and investments have grown at an extremely rapid pace in recent years, and the operations of corporations have become increasingly multinationalized. Corporate executives buying and selling goods and services, and making financing and investment decisions across national boundaries, have developed policies and procedures for managing cash flows denominated in foreign currencies. These policies and procedures, and the related managerial actions of executives, change as new relevant information becomes available. The purpose of the Journal of Multinational Financial Management is to publish rigorous, original articles dealing with the management of the multinational enterprise. Theoretical, conceptual, and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • Foreign exchange risk management • International capital budgeting • Forecasting exchange rates • Foreign direct investment • Hedging strategies • Cost of capital • Managing transaction exposure • Political risk assessment • International working capital management • International financial planning • International tax management • International diversification • Transfer pricing strategies • International liability management • International mergers.