Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea
When companies invest in their internal accounting personnel, investors place greater trust in disclosed earnings information and highly regard a company’s information transparency. This results in prompt investment decisions regarding the company. Consequently, earnings information will be immediat...
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LLC "CPC "Business Perspectives"
2023-12-01
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| Series: | Investment Management & Financial Innovations |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19261/IMFI_2023_04_Ryu.pdf |
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| author | Haeyoung Ryu Soo-Joon Chae |
| author_facet | Haeyoung Ryu Soo-Joon Chae |
| author_sort | Haeyoung Ryu |
| collection | DOAJ |
| description | When companies invest in their internal accounting personnel, investors place greater trust in disclosed earnings information and highly regard a company’s information transparency. This results in prompt investment decisions regarding the company. Consequently, earnings information will be immediately reflected in stock prices, thereby reducing stock price drift. The purpose of this study is to examine the impact of investments in establishing and operating internal accounting systems on investors’ responses to the mitigation of stock price drift. The study focused on firms listed on the Korea Exchange from 2011 to 2018 and constructed a regression model using the cumulative abnormal return following earnings disclosure dates for 30, 60, and 120 days as the dependent variable, with the characteristics of internal accounting personnel as independent variables. The analysis reveals that companies with many internal accounting personnel and position experts, such as accountants, within their internal accounting control systems, experience a significantly lower stock price drift. The coefficients of the interaction terms between internal accounting personnel characteristics and standardized unexpected earnings are positive and significant at the 1% level for all cumulative abnormal return values. The findings of the study indicate that as efficiency is secured, stemming from the scale of personnel managing internal accounting control systems and their expertise, market investors’ understanding and trust of accounting information also increase. Investors, as information users, react promptly to the earnings information disclosed by the company, leading to a decrease in stock price drift.
AcknowledgmentsThis work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A8070518). |
| format | Article |
| id | doaj-art-439023da8329413e929ae483bfe89433 |
| institution | Kabale University |
| issn | 1810-4967 1812-9358 |
| language | English |
| publishDate | 2023-12-01 |
| publisher | LLC "CPC "Business Perspectives" |
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| series | Investment Management & Financial Innovations |
| spelling | doaj-art-439023da8329413e929ae483bfe894332025-02-03T10:07:43ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582023-12-0120437538510.21511/imfi.20(4).2023.3019261Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from KoreaHaeyoung Ryu0https://orcid.org/0000-0003-4568-1244Soo-Joon Chae1https://orcid.org/0000-0002-5482-6209Ph.D., Associate Professor, Department of Business Administration, Hansei University, KoreaPh.D., Professor, Department of Business Administration & Accounting, Kangwon National University, KoreaWhen companies invest in their internal accounting personnel, investors place greater trust in disclosed earnings information and highly regard a company’s information transparency. This results in prompt investment decisions regarding the company. Consequently, earnings information will be immediately reflected in stock prices, thereby reducing stock price drift. The purpose of this study is to examine the impact of investments in establishing and operating internal accounting systems on investors’ responses to the mitigation of stock price drift. The study focused on firms listed on the Korea Exchange from 2011 to 2018 and constructed a regression model using the cumulative abnormal return following earnings disclosure dates for 30, 60, and 120 days as the dependent variable, with the characteristics of internal accounting personnel as independent variables. The analysis reveals that companies with many internal accounting personnel and position experts, such as accountants, within their internal accounting control systems, experience a significantly lower stock price drift. The coefficients of the interaction terms between internal accounting personnel characteristics and standardized unexpected earnings are positive and significant at the 1% level for all cumulative abnormal return values. The findings of the study indicate that as efficiency is secured, stemming from the scale of personnel managing internal accounting control systems and their expertise, market investors’ understanding and trust of accounting information also increase. Investors, as information users, react promptly to the earnings information disclosed by the company, leading to a decrease in stock price drift. AcknowledgmentsThis work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A8070518).https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19261/IMFI_2023_04_Ryu.pdfinformation reliabilityinternal accounting personnelinternal accounting systeminvestment decisionpost earnings announcement driftstock price drift |
| spellingShingle | Haeyoung Ryu Soo-Joon Chae Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea Investment Management & Financial Innovations information reliability internal accounting personnel internal accounting system investment decision post earnings announcement drift stock price drift |
| title | Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea |
| title_full | Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea |
| title_fullStr | Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea |
| title_full_unstemmed | Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea |
| title_short | Impact of human resource characteristics of internal accounting system on post-earnings announcement drift: Evidence from Korea |
| title_sort | impact of human resource characteristics of internal accounting system on post earnings announcement drift evidence from korea |
| topic | information reliability internal accounting personnel internal accounting system investment decision post earnings announcement drift stock price drift |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19261/IMFI_2023_04_Ryu.pdf |
| work_keys_str_mv | AT haeyoungryu impactofhumanresourcecharacteristicsofinternalaccountingsystemonpostearningsannouncementdriftevidencefromkorea AT soojoonchae impactofhumanresourcecharacteristicsofinternalaccountingsystemonpostearningsannouncementdriftevidencefromkorea |