Global Diversification, Real Earnings Management, and Future Performance: Evidence from Korea

초록

Research has generally focused on demonstrating real earnings management (REM) stemming from managerial opportunism using the agency framework. Examining a sample of firms on the Korea Composite Stock Price Index from 2011 to 2019, we explore the benefits of REM. Empirical results show a positive relationship between corporate globalization and the extent of REM, and corporate globalization mitigates the negative relationship between REM and future (operating and market) performance, observed only in firms with a low incentive to engage in REM for zero earnings. Global firms with more operational flexibility may strategically utilize REM to avoid temporary crises and perform better in the future.

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