Earnings management vehicles for Korean firms

Soon Suk Yoon, Gary Miller, Pornsit Jiraporn

Research output: Contribution to journalArticlepeer-review

29 Scopus citations


We investigated the vehicles that Korean firms use when the firms manage earnings. We partitioned our sample into low, mid and high accrual sub-samples based on discretionary accruals. Low accrual firms are defined as income-decreasing firms whereas the high accrual firms are considered income increasing firms in this study. We decomposed accounting earnings into cash from operations and various components of accruals in a systematic way. Next we examined the types of accruals individual firms use when the respective firms increase reported earnings. The empirical results of the study indicate that there are clear discrepancies in the earnings management vehicles firm use when the firms manage earnings depending on the directions of earnings management. More specifically, income-increasing firms frequently employ non-cash revenues including asset-disposal gains. Income-decreasing firms employ non-cash expenses including bad-debt expenses and asset-disposal losses. Firms also tend to use current accruals but to a limited extent as current accruals entail cash flow implications in the following years.

Original languageEnglish (US)
Pages (from-to)85-109
Number of pages25
JournalJournal of International Financial Management and Accounting
Issue number2
StatePublished - Jun 2006

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance


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