The effects of listing status on a firm’s lease accounting: Evidence from South Korea

Younghee Park; Kyunga Na

doi:10.22146/gamaijb.12848

The effects of listing status on a firm’s lease accounting: Evidence from South Korea

Younghee Park, Kyunga Na

(Submitted 4 September 2016)

(Published 10 April 2017)

Abstract

This study examines how the listing status affects a firm’s choice of lease accounting, using 7,023 firm-year observations that record either an operating or a capital lease from 2001 to 2013 in Korea. We find that unlisted firms are more likely to opt for operating leases, and to have a higher ratio of operating leases than listed firms are. These results indicate that unlisted firms tend to prefer operating leases which can be used as a tool to avoid increasing debt levels and to benefit from off-balance sheet financing (or unrecorded liabilities), compared to listed firms. This study contributes to the current accounting literature as it is the first to provide empirical evidence regarding the impact of the listing status on a firm’s lease accounting.

Full Text: PDF

DOI: 10.22146/gamaijb.12848

References

Ball, R., and L. Shivakumar. 2005. Earnings Quality in U.K. Private Firms: Comparative Loss Recognition Timeliness. Journal of Accounting and Economics 39 (1): 83–128.

Burgstahler, D. C., L. Hail, and C. Leuz. 2006. The Importance of Reporting Incentives: Earnings Management in European Private And Public Firms. The Accounting Review 81 (5): 983–1016.

Chaney, P. K., D. C. Jeter, and L. Shiva kumar. 2004. Self-Selection of Auditors and Audit Pricing in Private Firms. The Accounting Review 79 (1): 51–72.

Cloyd, C. B., J. Pratt, and T. Stock. 1996. The Use of Financial Accounting Choice to Support Aggressive Tax Positions; Public and Private Firms. Journal of Accounting Research 34 (1): 23–43.

Hope, O. K., W. B. Thomas, and D. Vyas. 2013. Financial Reporting Quality of U.S. Private and Public Firms. The Accounting Review 88 (5): 1715–1742.

Imhoff, E., R. Lipe, and D. Wrignt. 1991. Operating Leases: Impact of Constructive Capitalization. Accounting Horizons 5 (1): 51–63.

Kim, H. J. 2008. Financial Characteristics of Lessee Company by the Type of Lease Contract. Unpublished Dissertation, University of Seoul, Seoul.

Korea Accounting Institute. http://www.kasb.or.kr/

Lee, J. H. 1999. Economic incentives for Lessees' Accounting Choices. Korean Accounting Review 24 (1): 141–162.

Nam, H. J. 2010. The Effect of Listing Status and Audit Quality on Earnings Quality -Focused on Small Companies. Korean Accounting Journal 19 (3): 55–82.

Petersen, M. A. 2009. Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches. Review of Financial Studies 22 (1): 435–480.

Shawn, H., and Lee, J. H. 2015. How Does Lease Choice Work? A New Perspective on the Determinants in Lease Choice. Korean Accounting Review 40 (5): 105–134.

Shin, S. M. 2009. An Empirical Study on Tax and Non-tax Factors Affecting Firms' Decision on Lease Use and Lease Type Choice. Korean Academic Society of Taxation 26 (1): 71–103.

Shin, S. M. 2015. Lease-Debt Substitutability, Firms` Tax Burden and Debt Capacity. Korean Accounting Review 40 (3): 1–42.

Watts, R., and J. Zimmerman. 1986. Positive Accounting Theory. Upper Saddle River, NJ: Prentice-Hall.

Yi, H. D. 2001. A Study on Lease Choices and Firms' Characteristics. Korean Accounting Review 26 (3): 123-145.

Yoon, T. H., and Hong, J. H. 2001. Firm Characteristics affecting Choice of Accounting Methods for Leases. Korean Academic Society of Taxation 2 (1): 185–206.

Refbacks

There are currently no refbacks.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.