The Effect of Types, Agency Costs and Governance of Government-Owned Entities on the Book-Tax Difference: The Case of Korea

Abstract: This study has analyzed the influence of characteristics of government-owned entities on BTD(Book-Tax Difference) according to the type, agency cost and governance of Korean government-owned entities. Results of the study are as follows. First of all, the more likely it was for them to be quasi-government bodies, the more they were separatelu managed with proper purpose business accounting and profit business accounting. Therefore, they tended to have more opportunities to reduce tax burden or increase accounting profit. Hence, BTD turned out to be increased by a significant positive value. Secondly, according to the result of comparing agency cost and BRD in the goverment-owned entities, agency cost incurring from the president
of an organization turned out to be high. This implies that BTD increased to reduce cash outflow due to the cause for performance evaluation and tax burden. Third, hypothesis has been established indicating that governance of government-owned entities and BTD were not related with each other. However, they turned out not to be significant. Therefore, non-executive director policy (outside director policy) turned out not to properly function for keeping the president of an organization in check. According to the result of this study, it is meaningful that influence of characteristics of general companies and government-owned entities has expanded the scope of previous studies through agency cost with uncertainty of accounting profit information and governance. In addition, this study will be also meaningful that proper purpose business and profit
business appropriate for the goals for separate accounting from goverment-owned entities are sub-divided further while emphasizing that a research is needed to deal with accounting and tax proceedings of government-owned entities.