외국인투자자와 실제이익조정간 관계연구: 경기변동과 투자자심리를 중심으로

This study examines the relationship between foreign investors and the real earnings management of firms. Foreign investors are external monitoring subjects of firms. Empirical results of manufacturing firms listed on Korean Stock Market from 2005 to 2012 show that firstly, foreign investors have a negative effect on the real earnings management of the firm. Foreign investors show significant negative relationships, including the all four variables of abnormal cash flow from operations, abnormal production costs, abnormal discretionary, and sum of three abnormal real earnings management variables. Secondly, when business cycle and investor sentiment are in good position, foreign investors are likely to decrease real earnings management. Thirdly, the debt-to-equity ratio has a negative relationship with the real earnings management variable at 1% level, supporting the debt covenant hypothesis that the higher the debt ratio, the greater the upward revision of the profit.
Our findings are consistent with previous literature in that real earnings management tends to be lower as firm's foreign investors monitoring role is effective. These findings are also consistent when business cycle and investor sentiment are considered. Foreign investors may be less sensitive to information on local firms, but prevent the controlling shareholders from abusing power through the dominance of information superiority and investment strategies in the macroeconomic sector. The positive relationship between the growth potential of the firm and the real earnings management shows a negative relationship, indicating that the incentive to raise the earnings management decreases for the companies with growth potential.