Every year when corporate financial reports are disclosed, various media outlets and institutions frequently report that Korean firms' retention ratios are astronomically high, attributing this to firms increasing their cash holdings and not investing. But does an increase in the retention ratio actually lead to increased cash holdings and decreased investment? This study empirically analyzed the effect of increases in corporate retained earnings on the composition of corporate assets, including cash and cash equivalents, investment assets, and other categories. Total assets were broadly classified into six categories for regression analysis, and the results were compared with those of other countries. To this end, this study first identified problems with the retention ratio calculation through a discussion from the perspective of accounting theory and conducted an international comparison of retention ratios. However, the modified retention ratio presented in this study is intended to promote a correct understanding of the retention ratio rather than to advocate for the use of a new retention ratio indicator, since the correct use of the retention ratio indicator must precede any international comparison. From an accounting theory perspective, the retention ratio formula needs to be modified to account for share premium and revaluation surplus. The reason is that when the retention ratio formula is changed, the absolute value of corporate retention ratios decreases significantly, confirming that it is not as socially problematic as perceived. Analysis of retention ratios for domestic firms revealed that, contrary to general expectations, the median retention ratio over the past ten years was higher or similar for medium-sized firms compared to large firms. In the international comparison of retention ratios, Korean large firms ranked fifth after Germany, Japan, the United Kingdom, and the United States, while Korean medium-sized firms ranked third after the United Kingdom and Japan. In contrast, Korean small firms ranked second after Japan, indicating that retention ratios of Korean small firms were relatively high compared to those of large and medium-sized firms. Thus, the international comparison results showed that Korean small firms had relatively high retention ratios. Examining the regression analysis results between increases in retained earnings and each asset category, retained earnings contributed to the formation of not only cash and cash equivalents but also quick assets, inventories, investment assets, tangible assets, and intangible assets. However, for large firms, retained earnings did not contribute to increases in cash and cash equivalents. Increases in investment assets for large firms were related to increases in retained earnings and showed a negative relationship with current liabilities and non-current liabilities. In the case of tangible assets, regardless of firm size, increases in retained earnings, current liabilities, and non-current liabilities were all closely related to increases in tangible assets. Consequently, an increase in corporate retained earnings does not necessarily lead to an increase in cash and cash equivalents; rather, retained earnings, like debt, have already been invested in all types of assets—including land, machinery and equipment—and are contributing to business operations. These results were similar across country-by-country regression analyses. Therefore, the argument in some quarters that retained earnings should be invested is a contradictory assertion to reinvest funds that have already been invested. Going forward, the social perception of retention ratios needs to be reestablished. Moreover, to induce and create an environment for corporate investment, the priority should be to use more appropriate indicators that can evaluate corporate investment activities. This study is significant and distinctive in that it presents direct empirical analysis results on the procurement and utilization of corporate investment funds. It is hoped that this study can serve as foundational material for correcting the misperceptions about retention ratios.