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korean management review - Vol. 45, No. 1, pp. 67-93
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 29 Feb 2016
Received 03 Sep 2015 Accepted 15 Dec 2015
DOI: https://doi.org/10.17287/kmr.2016.45.1.67
Firm Life Cycle and Financial Reporting Comparability
Haewon Moon* ; Eunhye Jo** ; Kwan Choi***
*Ph.D. Candidate, School of Business, SungKyunKwan University, First Author
**Ph.D. Candidate, School of Business, SungKyunKwan University, Corresponding Author
***Professor, School of Business, SungKyunKwan University, Co-Author
기업수명주기와 회계정보의 비교가능성
문해원* ; 조은혜** ; 최관***
*(주저자) 성균관대학교 경영대학 회계학 전공 박사과정 (capy2rum2@skku.edu)
**(교신저자) 성균관대학교 경영대학 회계학 전공 박사과정 (gracejo@skku.edu)
***(공저자) 성균관대학교 경영대학 회계학 전공 교수 (kwanchoi@skku.edu)

This paper investigates the effect of the firm life cycle on the inter-company accounting comparability. The firm life cycle theory suggests that firms, like living organisms, pass through a series of development stages. Each firm life cycle stage has important characteristics that economic environment, firm structure and management strategies of the firm vary significantly with the corresponding stages(Miller and Friesen, 1980; Quinn and Cameron, 1983). Accounting information reflected on financial statement is also different depending on life cycle. This study examines whether firm life cycle impacts on financial reporting comparability.

Comparability of accounting information is a qualitative characteristic that enables users of financial statements to identify similarities in and differences between two sets of economic phenomena (definition in K-IFRS). Comparability lowers the cost of acquiring firms and processing information, which increases the overall quantity and quality of information available to investors. Prior studies show that high comparability also improves analyst forecast accuracy (De Franco et al., 2011; Kang et al., 2013) and the ability of current stock return to reflect future earnings(Choi et al., 2014).

The research on the determinants of comparability has investigated the role of accounting standards such as the adoption of IFRS, degree of enforcement ability(Yip and Young, 2012; Barth et al., 2012; Francis et al., 2014). Yip and Young(2012) show mandatory IFRS adoption improves comparability in 17 European countries. Barth et al.(2012) investigate the comparability of non-U.S firms that adopt IFRS with that of U.S firms. They found that non-U. S firms adopting IFRS have greater comparability and comparability is greater for IFRS firms that adopted IFRS mandatorily, for IFRS firms domicied in countries with common law, for IFRS firms with high enforcement.

Also, the role of auditors affects inter-company comparability(Francis et al., 2014). Each Big 4 audit firm has its own unique auditing process for interpreting and applying accounting standard(Francis et al., 2014). Because of this, two companies audited by the same Big4 auditor have more comparable earnings than two firms audited by two different Big 4 auditors.

We expect firm life cycle affects accounting comparability based on following two explanations. First, earnings attributes vary across life cycle stage. Previous studies show main variable, earnings attributes, value-relevance vary across the life cycle. Second, the degree of matching and earnings management vary across life cycle stage. Based on the above discussion, we derive following two research hypotheses. First, two companies included in same life cycle have more comparable earnings than two firms included in different life cycle. Second, if a pair of firms has different(same) life cycle and one of the firms changes life cycle to have same(different) cycle, then they have more(less) comparable earnings after the change.

We measure comparability in two ways. The first approach is to examine differences in accruals between pairs of firms in the same year-industry((Francis et al., 2014). The second approach is to examine differences in expected earnings between pairs of firms in the same year-industry given same economic events(De Franco et al., 2011). As for the firm life cycle, we adopt a composite measure based on the three growth rates for sales, fixed assets, and the number of employees. We classify the sample into three stages: growth, mature and decline stages. To test the hypotheses, we use the 13,302 firm-pairs listed on the Korea Stock Exchange for the period of 2005 to 2012.

The empirical results of this study are as follows. First, two companies included in same life cycle have more comparable earnings than two firms included in different life cycle. Second, if a pair of firms has different(same) life cycle and one of the firms change life cycle to have same (different) cycle, then after the change they have more(less) comparable earnings.

This is the first study to investigate whether firm life cycle affects inter company comparability. This paper also provides evidence that firm life cycle is an important factor affecting accounting comparability.

본 연구는 기업이 동일한 수명주기에 속하는지 아니면 서로 다른 수명주기에 속하는지에 따라서 회계정보의 비교가능성이 차이가 나는지를 분석했다. 선행연구는 기업의 수명주기가 이익의 지속성, 예측가능성과 같은 이익의 속성뿐만 아니라 경영자의 재무보고 행태에도 영향을 준다고 보고하였다. 이러한 수명주기의 차이는 기업 간의 비교가능성에 차이를 가져오는 요인으로 작용할 가능성이 높다. 본 연구는 두 기업이 동일한 수명주기에 속한 경우에 서로 다른 수명주기에 속한 경우보다 기업 간 회계정보의 비교가능성이 높을 것으로 예상하였다. 그리고 수명주기가 변화할 경우, 이전에 서로 다른(동일한) 수명주기에 속한 두 기업이 동일한(서로 다른) 수명주기로 변화하는 경우에 비교가능성이 증가(감소)할 것으로 예상하였다.

가설검증을 위해 비교가능성은 발생액 구조의 유사성(Francis, Pinnuck, and Watanabe, 2014)과 동일한 경제적 사건 하의 보고이익의 유사성(De Franco, Kothari, and Verdi, 2011)으로 측정하였다. 그리고 수명주기는 매출액증가율, 유·무형자산증가율, 그리고 종업원증가율을 이용하여 성장기, 성숙기, 쇠퇴기 세 단계로 구분하였다(백원선·박성진, 2013; 최헌섭·장지인·신상철, 2006). 2005년부터 2012년까지 동일 연도-산업에 속한 유가증권 상장기업 13,302개의 기업쌍(firm-pair)의 관측치를 이용하여 분석한 결과, 동일한 수명주기에 속한 기업쌍은 서로 다른 수명주기에 속한 기업쌍에 비해 비교가능성이 높았다. 그리고 서로 다른 수명주기에 속하던 기업쌍이 동일한 수명주기로 변화하는 경우 비교가능성이 유의하게 증가하였다. 하지만 동일한 수명주기에 속하던 기업쌍이 서로 다른 수명주기로 변화한 경우에는 비교가능성이 감소하였다. 선행연구들이 재무보고의 내적속성인 이익특성 등이 회계정보의 비교가능성에 영향을 줌을 연구한 반면에, 본 연구는 기업의 외적환경인 수명주기가 재무제표의 비교가능성에 영향을 줌을 보여주었다는 점에서 학술적 공헌점이 있다.