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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 52, No. 5, pp.1137-1157
ISSN: 1226-1874 (Print)
Print publication date 31 Oct 2023
Received 24 Apr 2023 Revised 14 Aug 2023 Accepted 17 Aug 2023
DOI: https://doi.org/10.17287/kmr.2023.52.5.1137

주거래 은행의 자산건전성과 기업의 재무제표 비교가능성 간 관련성

Sung Min Jeon ; Sang Hyuk Lee
(First Author) Researcher (Ph.D.), Institute for Business Research and Education (IBRE), Korea University hsungminh@gmail.com
(Corresponding Author) Assistant Professor, School of Social Science, Hansung University tkdqur@hansung.ac.kr
The Relation Between Main Bank’s Asset Quality and Firms’ Financial Comparability


Copyright 2023 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This study empirically analyzes whether the asset quality of the main bank is related to the firms' financial comparability. Most Korean companies engage in long-term relationship lending with the main banks. Through this relationship, banks can monitor the opportunistic behavior of managers. However, if the asset quality of the main bank deteriorates, the bank's incentive to monitor can decrease. Thus we expect that the main banks' asset quality will be related to the firms' financial comparability. The results of empirical analysis as follows. First, we find a negative relation between the asset quality of the main bank and the firms' financial comparability. Second, this relation between the asset quality of the main bank and the comparability is stronger in firms with a lower level of corporate governance. Finally, we conduct additional tests for endogeneity and find that the results are consistent with our main hypothesis. This study has contributions by expanding the research on the determinants of comparability. In addition, our result that bank asset quality is related to firms' financial comparability has implications in that bank asset quality not only threatens the stability of the bank itself but also affects lending firms' decisions.

Keywords:

main bank, main bank’s asset quality, financial comparability, corporate governance

Acknowledgments

This research was financially supported by Hansung University.

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∙ The author Sungmin Jeon is a researcher for Institute for Business Research and Education (IBRE), Korea University Business School. She graduated from Korea University Business School and worked for Citi Bank Korea. She received her Ph.D. in Business Administration at Korea University. Her research interests are Valuation, Corporate Governance, and CEO compensation.

∙ The author Sang Hyuk Lee is an Assistant Professor, School of Social Science, Hansung University. He received his Ph.D. in Business Administration at Korea University. As a certified public accountant (KICPA), he worked for Samil PwC and KRX. Sang Hyuk Lee’s research interests are Valuation, Disclosure and Corporate Governance.