The Differential Choice Of Chaebol In Earnings Management

Abstract

This study examines the methods of the differential choice of Korean “chaebol” in earnings management. Consistent with our prediction, we find a negative association between chaebols’ ownership and accrual-based earnings management, whereas there is no clear difference between chaebols’ ownership and real-based earnings management. Furthermore, we find evidence that chaebols exhibit a strongly positive relationship with overproduction-based real activities manipulation, indicating that chaebols prefer overproduction as a method of real earnings management. From additional analyses, we also find that abnormal cash flow from operations is negatively associated with suspect chaebol firm-years that just met zero.