Current Issue
CONTENTS of Volume 27, Number 2, December 2021
Auditors’ Response to Audit Fee Lowballing: The Change in Audit Hours and Hourly Audit Fees
Author SUNYOUNG PARK, EUGENIA Y. LEE, JONG-HAG CHOI
Keywords auditor change, lowballing, audit hours, hourly audit fees
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This study examines how lowballing auditors adjust audit hours and
hourly audit fees. Using Korean data, we first find that both lowballing
auditors and other auditors increase audit hours in the first year of an
audit engagement. However, only lowballing auditors charge lower hourly
audit fees in the initial year. The results suggest that lowballing auditors
charge low hourly fees to win a new audit contract while exerting more
effort to maintain an appropriate level of audit quality. Our findings
mitigate regulators’ concern that lowballing auditors would reduce effort
and sacrifice audit quality to attract new contracts.
Information Uncertainty and Intraday Market Responses to Corporate Disclosures: A Study of the Korean Stock Market
Author BRYAN BYUNG-HEE LEE, DURI PARK
Keywords intraday market responses; corporate disclosures; information uncertainty
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Using market microstructure data, this study analyzes intraday market
responses to corporate disclosures subject to Regulation Fair Disclosure in
Korea and examines whether the intraday market responses are affected
by information uncertainty. We show that corporate news is incorporated
into stock prices in an efficient and timely manner. We further document
that positive stock returns and trading volume to good news disclosures are
stronger for firms with higher information uncertainty. Overall, our evidence
suggests that information uncertainty plays an important role in investors’
reactions to corporate disclosures.
Does Analyst Coverage Encourage Firm Innovation? Evidence from Korea
Author WOOJIN KIM, YOONYOUNG CHOY
Keywords corporate venture capital, financial analysts, innovation, acquisition, R&D
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This paper examines whether analyst coverage affects firm innovation
in an economy dominated by family-controlled business groups. Using a
sample of Korean publicly traded firms from 2010 to 2018, we find that
an increase in financial analysts leads covered firms to cut investments
in corporate venture capital and R&D. Moreover, reduction in innovation
through acquisitions is more pronounced when analysts are from chaebol
(family-controlled large business group) affiliated brokerages. These findings
suggest that unlike in U.S., analyst coverage puts pressure on managers
to meet the analysts’ forecasts, thereby impeding innovation under such
environment.
Seoul Journal of Business

ISSN 1226-9816 (Print)
ISSN 2713-6213 (Online)
ISSN 2713-6213 (Online)