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Article
Publication date: 16 July 2018

Sungsoo Kim and Brandon byunghwan Lee

This paper aims to clarify the relationship between corporate capital investments and business cycles. Specifically, a major purpose of this paper is to investigate…

Abstract

Purpose

This paper aims to clarify the relationship between corporate capital investments and business cycles. Specifically, a major purpose of this paper is to investigate whether there are inherent differences in corporate investment patterns and whether the stock market exhibits different reactions to the value relevance of capital expenditures across different business conditions.

Design/methodology/approach

The authors use pooled ordinary least square regressions with archival stock price data and financial data from CRSP and Compustat. The authors regress buy and hold returns on the main test variables and control variables that are identified to be related to the investment literature.

Findings

This paper provides empirical evidence that US firms’ capital expenditures are more value relevant to capital market participants during expansionary business cycles and, conversely, less value relevant during contractionary business cycles. This evidence validates previous literature that has found the information content of capital expenditures to be uncertain and cyclical in nature.

Research limitations/implications

The main limitation of this paper, as with other work dealing with stock returns and archived financial data, is that the authors try to match stock returns with contemporaneous financial data in an association study context. The precise mapping in this methodology is always challenging and has been questioned in the literature.

Practical implications

This paper has various implications for capital market participants. Capital expenditures are good news for investors, but they will make a better investment when firms make capital investments during an expansionary period. Creditors deciding whether to extend credit to firms would benefit from more accurate information on the viability of long-term investment. The results also suggest to creditors that an excessive number of loans during the contractionary period may be suboptimal because firms’ returns on capital investment are smaller in that period than in the expansionary period.

Social implications

Given the valuation of implications of long-term capital investments across different business conditions, this paper sheds light on asset allocations for mutual funds, institutional investors who are entrusted with investors’ investments including retirement funds.

Originality/value

This paper fulfils an identified need to study how capital investments are valued differently across different business conditions.

Details

Studies in Economics and Finance, vol. 35 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

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Article
Publication date: 3 June 2021

Jun Guo, Sungsoo Kim, Yang Yu and Jung Yeun (June) Kim

The study aims to understand the role of accountant in corporate social responsibility (CSR) practice.

Abstract

Purpose

The study aims to understand the role of accountant in corporate social responsibility (CSR) practice.

Design/methodology/approach

In this study, the authors examine whether and how chief financial officer (CFO) accounting expertise and previous work experience influence voluntary CSR disclosure, using textual analysis and natural language processing (NLP) techniques. The authors find that firms' CFOs with accounting expertise disclose more CSR issues in their 10-K reports. Overall, this study provides evidence of the impact of CFOs' professional and personal attributes on voluntary CSR disclosure in corporate annual reports. This study has important implications to investors and policy makers in the context of CSR disclosure regulations in annual reports.

Findings

Overall, this study provides evidence of the impact of CFOs' professional and personal attributes on voluntary CSR disclosure in corporate annual reports. This study has important implications to practitioners and policy makers in the context of CSR disclosure regulations in annual reports.

Research limitations/implications

There is an inherent limitation of textual analysis as the tool tries to read key words from the text.

Practical implications

This finding is useful for policy maker and investors as CSR is known to have impact on the share price.

Originality/value

This paper is the first attempt to find out accountants' role in CSR activities, which has not been examined in the prior literature.

Details

Journal of Applied Accounting Research, vol. 22 no. 5
Type: Research Article
ISSN: 0967-5426

Keywords

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Article
Publication date: 6 November 2017

Levan Efremidze, Sungsoo Kim, Ozan Sula and Thomas D. Willett

This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.

Abstract

Purpose

This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.

Design/methodology/approach

Emphasizing the importance of looking at the behavior of domestic as well as foreign capital flows, the authors distinguish sudden stops from capital flow reversals by attributing the former to foreign capital flows only.

Findings

It is found that, despite the large differences in the number of surges identified by several different measures in the literature, a majority of surges do end in reversals of some type. The percentages tend to be slightly over half for surges in net capital flows, but on average, 70 per cent of gross surges end in sudden stops. Furthermore, contrary to popular belief, approximately half of sudden stops and net capital flow reversals are not preceded by surges. It is also found that surges that persist longer are more likely to turn into sudden stops and reversals.

Research limitations/implications

The authors find substantial empirical differences in the characteristics of sudden stops (based on gross foreign flows) and reversals (based on net flows).

Practical implications

Large inflows of financial capital are not always a strong indicator that a country’s economic policies will continue to provide stability in the future. They may signal an increase rather than reduction in the risk of future instability.

Originality/value

This study focuses on an issue that has been less explored to date, the relationship between capital flow surges, reversals and sudden stops. The authors distinguish, redefine and document differences among capital flow reversals and sudden stops. Duration of surges is related to the likelihood of having reversals and sudden stops.

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Article
Publication date: 1 July 2007

Seok Woo Jeong, Jinbae Kim and Sungsoo Yoon

In Korea, a regulatory body can assign auditors to firms if they possess certain characteristics that cast doubt on auditor independence or the reliability of accounting…

Abstract

In Korea, a regulatory body can assign auditors to firms if they possess certain characteristics that cast doubt on auditor independence or the reliability of accounting disclosures. This paper investigates whether such mandatory assignment of auditors improves investors’ perceptions of the quality of accounting information. Using over 4,000 firm‐year observations from 1994 to 2002, we find that investors respond more favorably to positive earnings audited by assigned auditors than to those audited by non‐assigned auditors. Negative earnings, however, do not lead to significantly different reactions. Capital market participants respond more favorably to the book value of equity audited by assigned auditors than to that audited by non‐assigned auditors.

Details

Accounting Research Journal, vol. 20 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

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Article
Publication date: 1 March 2005

Ehsan H. Feroz, Sungsoo Kim and Ray Raab

Corporate finance studies of mergers and acquisitions have relied mostly on stock price reactions to evaluate the impact of these events. In this paper, we analyze the…

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1207

Abstract

Corporate finance studies of mergers and acquisitions have relied mostly on stock price reactions to evaluate the impact of these events. In this paper, we analyze the performance of a sample of merged firms over a ten year period using a managerially controlled efficiency measure, data envelopment analysis (DEA). Our individual firm‐level year‐by‐year analyses indicate that the managerial performance of the merged firms generally improved in the post‐merger period as documented in the earlier studies of mergers and acquisitions. However, there were also a significant number of cases where we could not observe improved managerial efficiency using this less aggregated approach. We conclude that DEA based disaggregated approaches are useful tools in the hands of corporate governance boards with an interest in yearly or even quarterly managerial performance at the individual firm level.

Details

Review of Accounting and Finance, vol. 4 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

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Article
Publication date: 1 January 2013

Shannon Allen, Sungsoo Kim and Mark Zitzler

Using Fortune 50 company financial statements data, this paper aims to investigate the use of interest rate swaps in post‐liquidity crisis.

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1628

Abstract

Purpose

Using Fortune 50 company financial statements data, this paper aims to investigate the use of interest rate swaps in post‐liquidity crisis.

Design/methodology/approach

The paper uses Fortune 50 company financial statements data in this study.

Findings

The paper finds that the 50 largest US firms use this derivative mainly for hedging purpose. This is consistent with the prediction that facing unprecedented level of economic uncertainty sample firms use this instrument mainly to hedge against interest rate fluctuations, thus reducing their vulnerability in the credit market.

Originality/value

This finding is different from the findings of prior swap literature in that speculative motivation of swaps from fixed to variable interest payments are no longer found. The authors attribute this new evidence to the changed macro‐economic environment where firms' natural reaction to the increased uncertainty is to protect assets and liabilities, not to take chances on the directions of the market interest rates.

Details

Managerial Finance, vol. 39 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 1 August 2001

Sungsoo Kim

Notes that although previous research has found capital expenditure to be value relevant, there has been no direct evidence that it has a positive linear association with…

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586

Abstract

Notes that although previous research has found capital expenditure to be value relevant, there has been no direct evidence that it has a positive linear association with future earnings. Uses 1976‐1989 data from a sample of US manufacturing firms to examine this link and finds that firms do not systematically invest in earnings increasing projects. Shows that firms without future losses (“winners”) had a positive association between capital expenditure and future earnings but those with losses (“losers”) had a negative one; and that if losses are excluded, capital expenditure generally gives positive information about future earnings. Considers consistency with other research, the limitations of the study and avenues for further research.

Details

Managerial Finance, vol. 27 no. 8
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 December 2003

Jamie C. Gollotto and Sungsoo Kim

This article empirically examines whether the ratio of research and development (R&D)spending to sales and marketing spending has an impact on the valuation of Dot Com…

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1160

Abstract

This article empirically examines whether the ratio of research and development (R&D)spending to sales and marketing spending has an impact on the valuation of Dot Com companies. These companies are currently trading in today’s stock market. Previous research has not been able to link the lofty market value of Dot Com companies to a distinguishable trait. Many theories have been proposed without empirical findings to support them. We find those Dot Com companies with higher ratios of R&D spending are more likely to have higher stock market values in the subsequent year than those with lower ratios. A sensitivity test shows that the results are qualitatively the same even after market correction of high‐tech stock.

Details

Managerial Finance, vol. 29 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 27 February 2007

Steven Balsam, Richard Gifford and Sungsoo Kim

The objective of this research is to examine the effect of a broad‐based option program on voluntary employee turnover.

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3933

Abstract

Purpose

The objective of this research is to examine the effect of a broad‐based option program on voluntary employee turnover.

Design/methodology/approach

The paper examines the effect of a broad‐based stock option program in a Fortune 100 company during the 1990s and uses logistical analysis.

Findings

Employee turnover is an issue due to the costs involved in recruiting and training replacements. Voluntary turnover can be reduced if a cost can be imposed on the departing employee. This cost need not be an explicit cost, but can take the form of a benefit forgone when the employee departs. Along these lines, stock option grants to employees, if properly structured, have the ability to reduce voluntary employee turnover. The paper finds that voluntary turnover is lower during the periods in which the option cannot be exercised, i.e. the vesting period. This effect is strongest for employees approaching retirement, but also holds for employees leaving the company for other reasons.

Originality/value

The finding that unvested options reduce or delay voluntary turnover, which while intuitive, has not to the author's knowledge been shown previously, and is important for those involved in the compensation plan design process.

Details

Review of Accounting and Finance, vol. 6 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

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Article
Publication date: 19 July 2009

Sharad Asthana, Steven Balsam and Sungsoo Kim

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the Sarbanes‐Oxley Act on audit fees.

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5030

Abstract

Purpose

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the Sarbanes‐Oxley Act on audit fees.

Design/methodology/approach

The paper uses empirical methodology (univariate and multivariate).

Findings

Audit fees and the Big‐4 premium increased in 2002. Increase was larger for bigger and riskier clients. Evidence is also consistent with a competitive market for former Andersen clients.

Research limitations/implications

Data requirements might bias the sample towards larger sized firms. Data availability limits the number of observations.

Practical implications

The research findings on audit fees in post‐Enron and Arthur Andersen period reported in this paper are important for policy makers.

Originality/value

It is found that the premium charged by Big 4 over non‐Big 4 has increased in 2002, and that the ability of an auditor to charge a premium is adversely affected when its reputation is tarnished. It is also reported that the frequency of voluntary switches within the Big 4 is lowest in 19 years. The audit fee model was also refined by adding two ownership variables to control for agency aspect of client firms; inside and institutional ownership.

Details

Accounting Research Journal, vol. 22 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

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