Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.787
Sangeun Yeo, Yoonjung Lee, Jinho Byun
This study investigated the implications of Covid-19 induced non-face-to-face remote work environment on analysts’ reports. Employing an empirical analysis of the Korean market from 2016 to 2021, we reveal that research reports during the Covid-19 period exhibit larger prediction errors compared to the pre-Covid era. Despite the reduced accuracy, abnormal trading volumes were observed on the publication dates of reports during this period. Furthermore, these effects are particularly pronounced in reports issued by large brokerage firms with “Buy” recommendations and among foreign investors. Our findings highlight that the pandemic’s non-face-to-face environment has heightened uncertainty in research analysts’ predictions, leading to a decline in reporting accuracy. However, despite these challenges, there is an increase in demand for information from investors, and the impact of the analyst report on the financial market may be greater due to the higher demand for information from investors.
{"title":"Impact of Increased Uncertainty due to COVID-19 on Analyst Research Reports","authors":"Sangeun Yeo, Yoonjung Lee, Jinho Byun","doi":"10.26845/kjfs.2023.10.52.5.787","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.787","url":null,"abstract":"This study investigated the implications of Covid-19 induced non-face-to-face remote work environment on analysts’ reports. Employing an empirical analysis of the Korean market from 2016 to 2021, we reveal that research reports during the Covid-19 period exhibit larger prediction errors compared to the pre-Covid era. Despite the reduced accuracy, abnormal trading volumes were observed on the publication dates of reports during this period. Furthermore, these effects are particularly pronounced in reports issued by large brokerage firms with “Buy” recommendations and among foreign investors. Our findings highlight that the pandemic’s non-face-to-face environment has heightened uncertainty in research analysts’ predictions, leading to a decline in reporting accuracy. However, despite these challenges, there is an increase in demand for information from investors, and the impact of the analyst report on the financial market may be greater due to the higher demand for information from investors.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"65 10","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135808798","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.751
Jonghun Ahn, Sumi Choi
Amidst the COVID-19 pandemic, this study examines changes in the audit quality and reliability of financial statements. It explores the impact of increased incentives for earnings management and heightened audit risk for auditors as well as the factors influencing these changes. The key findings include a significant decline in audit quality, measured by discretionary accruals, post COVID-19. However, cases in which auditors demonstrated increased effort compared to the past did not exhibit a decline in audit quality. Moreover, the manufacturing sector has experienced a consistent and notable decrease in audit quality, and companies engaged in overseas operations or with substantial inventory assets have also faced a significant decline. This study emphasizes the need for stakeholders to remain vigilant about financial information reliability during this period of external upheaval, and offers valuable insights for potential audit procedure improvements in similar future situations.
{"title":"Factors Affecting Change in Audit Quality after COVID-19","authors":"Jonghun Ahn, Sumi Choi","doi":"10.26845/kjfs.2023.10.52.5.751","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.751","url":null,"abstract":"Amidst the COVID-19 pandemic, this study examines changes in the audit quality and reliability of financial statements. It explores the impact of increased incentives for earnings management and heightened audit risk for auditors as well as the factors influencing these changes. The key findings include a significant decline in audit quality, measured by discretionary accruals, post COVID-19. However, cases in which auditors demonstrated increased effort compared to the past did not exhibit a decline in audit quality. Moreover, the manufacturing sector has experienced a consistent and notable decrease in audit quality, and companies engaged in overseas operations or with substantial inventory assets have also faced a significant decline. This study emphasizes the need for stakeholders to remain vigilant about financial information reliability during this period of external upheaval, and offers valuable insights for potential audit procedure improvements in similar future situations.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"3 3","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135871756","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.641
Eun Jung Lee, Yu Kyung Lee
The COVID-19 pandemic has triggered an increased awareness and interest in ESG (Environmental, Social, Governance) among investors in the Korean market. Consequently, this study examines the changes in investors’ tastes and preferences regarding ESG before and after COVID-19 and analyzes how these changes affect the relationship between ESG and expected returns. The analysis revealed that, before COVID-19 the excess returns of portfolios constructed by buying stocks with high ESG scores and selling stocks with low ESG scores were not statistically significant. However, after COVID-19 the excess returns of these portfolios were significantly positive. This result suggests that prior to the pandemic, investors did not perceive ESG as a risk and showed no preference for ESG investments, leading to insignificant excess returns close to zero. In contrast, after the COVID-19 pandemic, increased interest in ESG resulted in a shift in investor preferences, leading to positive excess returns in ESG investments. The results remain consistent even after controlling for firm characteristics. Furthermore, when we examine the impact of each ESG component on expected returns separately, we find that heightened interest in environmental and social factors has a significant positive effect on expected returns.
{"title":"Changes in the Relation Between ESG and Expected Returns According to ESG Awareness Levels","authors":"Eun Jung Lee, Yu Kyung Lee","doi":"10.26845/kjfs.2023.10.52.5.641","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.641","url":null,"abstract":"The COVID-19 pandemic has triggered an increased awareness and interest in ESG (Environmental, Social, Governance) among investors in the Korean market. Consequently, this study examines the changes in investors’ tastes and preferences regarding ESG before and after COVID-19 and analyzes how these changes affect the relationship between ESG and expected returns. The analysis revealed that, before COVID-19 the excess returns of portfolios constructed by buying stocks with high ESG scores and selling stocks with low ESG scores were not statistically significant. However, after COVID-19 the excess returns of these portfolios were significantly positive. This result suggests that prior to the pandemic, investors did not perceive ESG as a risk and showed no preference for ESG investments, leading to insignificant excess returns close to zero. In contrast, after the COVID-19 pandemic, increased interest in ESG resulted in a shift in investor preferences, leading to positive excess returns in ESG investments. The results remain consistent even after controlling for firm characteristics. Furthermore, when we examine the impact of each ESG component on expected returns separately, we find that heightened interest in environmental and social factors has a significant positive effect on expected returns.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"242 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135870046","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.613
Ga-Young Jang, Hyoung-Goo Kang
This study begins with the following two questions: Has the COVID-19 pandemic altered the ESG literature landscape? If so, how has it changed? To answer these questions, we review ESG literature before and after the onset of the COVID-19 pandemic. Eventually, we aim to answer the following specific questions: (i) Which topics within the ESG domain gained the most popularity before and after the pandemic? (ii) What conclusions have been drawn from the existing literature? and (iii) Which areas of ESG research remain unexplored or require further investigation? We find that the literature on ESG has seen major changes after the onset of the pandemic, such as (i) heightened awareness of the importance of ESG measures among practitioners and academicians with a focus on specific facets of ESG; (ii) a growing focus on the social and governance aspects of ESG; (iii) a greater emphasis on the role of ESG considerations in sustainable recovery; (iv) the need for a consistent and standardized method of evaluating and reporting ESG matters; and (v) an escalating call for government interventions and regulatory support. Finally, we conclude this review by identifying potential avenues for future research.
{"title":"The Evolving Landscape of the ESG Literature Post-COVID-19","authors":"Ga-Young Jang, Hyoung-Goo Kang","doi":"10.26845/kjfs.2023.10.52.5.613","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.613","url":null,"abstract":"This study begins with the following two questions: Has the COVID-19 pandemic altered the ESG literature landscape? If so, how has it changed? To answer these questions, we review ESG literature before and after the onset of the COVID-19 pandemic. Eventually, we aim to answer the following specific questions: (i) Which topics within the ESG domain gained the most popularity before and after the pandemic? (ii) What conclusions have been drawn from the existing literature? and (iii) Which areas of ESG research remain unexplored or require further investigation? We find that the literature on ESG has seen major changes after the onset of the pandemic, such as (i) heightened awareness of the importance of ESG measures among practitioners and academicians with a focus on specific facets of ESG; (ii) a growing focus on the social and governance aspects of ESG; (iii) a greater emphasis on the role of ESG considerations in sustainable recovery; (iv) the need for a consistent and standardized method of evaluating and reporting ESG matters; and (v) an escalating call for government interventions and regulatory support. Finally, we conclude this review by identifying potential avenues for future research.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"102 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135872598","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.677
Dawon Lee, Rae Soo Park
Although the COVID-19 pandemic differs in origin from traditional economic crises, its adverse effects on the global financial market are notably more pronounced. Following the initial emergence of COVID-19, stock market indices experienced a sharp decline, and stock prices became more volatile. This paper focuses on the role of Environmental, Social, and Governance (ESG) performance of Korean-listed firms during the financial crisis stemming from the COVID-19 pandemic. This paper uses the ESG score and rating data from the Korea Institute of Corporate Governance and Sustainability (KCGS). It divides the analysis period into crisis (1st quarter in 2020) and post-crisis (from 2nd quarter in 2020 to 1st quarter in 2021) periods. The results show that the stock price fall of firms with good ESG performance in the crisis period was higher than that of firms with poor performance. However, the stock price resilience of firms with good performance is markedly higher. Additionally, the price volatility of firms with good ESG performance is lower than that of firms with poor performance. This paper provides new empirical evidence that ESG activity plays an important role in stock price resiliency and volatility in Korea, even during financial crises like the one spawned by the COVID-19 pandemic.
{"title":"The Effect of ESG Performance on Stock Price Resiliency and Volatility in Korea: Evidence from COVID-19 Pandemic","authors":"Dawon Lee, Rae Soo Park","doi":"10.26845/kjfs.2023.10.52.5.677","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.677","url":null,"abstract":"Although the COVID-19 pandemic differs in origin from traditional economic crises, its adverse effects on the global financial market are notably more pronounced. Following the initial emergence of COVID-19, stock market indices experienced a sharp decline, and stock prices became more volatile. This paper focuses on the role of Environmental, Social, and Governance (ESG) performance of Korean-listed firms during the financial crisis stemming from the COVID-19 pandemic. This paper uses the ESG score and rating data from the Korea Institute of Corporate Governance and Sustainability (KCGS). It divides the analysis period into crisis (1st quarter in 2020) and post-crisis (from 2nd quarter in 2020 to 1st quarter in 2021) periods. The results show that the stock price fall of firms with good ESG performance in the crisis period was higher than that of firms with poor performance. However, the stock price resilience of firms with good performance is markedly higher. Additionally, the price volatility of firms with good ESG performance is lower than that of firms with poor performance. This paper provides new empirical evidence that ESG activity plays an important role in stock price resiliency and volatility in Korea, even during financial crises like the one spawned by the COVID-19 pandemic.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135869620","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.711
Ji Yeol Jimmy Oh
The popularity of target date funds (TDFs) has recently increased among defined contribution pension plans. Despite their growing importance, how TDF flows and flow-performance relationships have changed in response to the COVID-19 pandemic is yet to be examined, particularly during the March 2020 market turmoil, when bond funds witnessed unprecedented outflows. We find that short-horizon TDFs experienced sizable outflows of over $13.5 billion between February and April 2020, whereas mid- and long-horizon TDFs received inflows over the same period. Given that short-horizon TDFs hold a much larger fraction of their portfolios on fixed-income securities, the outflows from these TDFs, whose fund-of-funds investment structure has been identified as a source of intra-family liquidity provision in previous studies, may have compromised the effectiveness of this liquidity provision mechanism during the COVID-19 market crash. We find that in the aftermath of the pandemic, the flow–performance relationship of short-horizon TDFs becomes markedly more concave, which hints at investors’ greater awareness of the downside risks associated with large outflows following their experience during the COVID-19 turmoil.
{"title":"Target Date Fund Flows Amidst the COVID-19 Pandemic","authors":"Ji Yeol Jimmy Oh","doi":"10.26845/kjfs.2023.10.52.5.711","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.711","url":null,"abstract":"The popularity of target date funds (TDFs) has recently increased among defined contribution pension plans. Despite their growing importance, how TDF flows and flow-performance relationships have changed in response to the COVID-19 pandemic is yet to be examined, particularly during the March 2020 market turmoil, when bond funds witnessed unprecedented outflows. We find that short-horizon TDFs experienced sizable outflows of over $13.5 billion between February and April 2020, whereas mid- and long-horizon TDFs received inflows over the same period. Given that short-horizon TDFs hold a much larger fraction of their portfolios on fixed-income securities, the outflows from these TDFs, whose fund-of-funds investment structure has been identified as a source of intra-family liquidity provision in previous studies, may have compromised the effectiveness of this liquidity provision mechanism during the COVID-19 market crash. We find that in the aftermath of the pandemic, the flow–performance relationship of short-horizon TDFs becomes markedly more concave, which hints at investors’ greater awareness of the downside risks associated with large outflows following their experience during the COVID-19 turmoil.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"168 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135870199","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-10-31DOI: 10.26845/kjfs.2023.10.52.5.821
Jimin Hong
This study examines the impact of health and health risks on individuals' decision-making using a bivariate utility function, where the level of utility depends on both wealth and health. The findings are as follows, first, partial insurance may be optimal even under an actuarially fair insurance premium. Conversely, full insurance or over insurance may be optimal, even under an actuarially unfavorable premium. Second, when the utility function exhibits cross-risk vulnerability toward health, the presence of unfair health risks, independent of losses, increases the demand for insurance. Third, correlation-loving individuals reduce their investment in risky assets as health deteriorates when their preference exhibits decreasing absolute risk aversion (DARA) in wealth and absolute risk aversion (ARA) in wealth is sufficiently large. Conversely, correlation-averse individuals reduce their investment in risky assets as health deteriorates when their preference for DARA and ARA in wealth is sufficiently small. Fourth, when the utility function exhibits cross-risk vulnerability toward health, the presence of unfair health risks independent of the returns of risky assets reduces the demand for those assets.
{"title":"The Impact of Health Risks on Individual Decision Making: Focusing on the Demand for Insurance and Risky Assets","authors":"Jimin Hong","doi":"10.26845/kjfs.2023.10.52.5.821","DOIUrl":"https://doi.org/10.26845/kjfs.2023.10.52.5.821","url":null,"abstract":"This study examines the impact of health and health risks on individuals' decision-making using a bivariate utility function, where the level of utility depends on both wealth and health. The findings are as follows, first, partial insurance may be optimal even under an actuarially fair insurance premium. Conversely, full insurance or over insurance may be optimal, even under an actuarially unfavorable premium. Second, when the utility function exhibits cross-risk vulnerability toward health, the presence of unfair health risks, independent of losses, increases the demand for insurance. Third, correlation-loving individuals reduce their investment in risky assets as health deteriorates when their preference exhibits decreasing absolute risk aversion (DARA) in wealth and absolute risk aversion (ARA) in wealth is sufficiently large. Conversely, correlation-averse individuals reduce their investment in risky assets as health deteriorates when their preference for DARA and ARA in wealth is sufficiently small. Fourth, when the utility function exhibits cross-risk vulnerability toward health, the presence of unfair health risks independent of the returns of risky assets reduces the demand for those assets.","PeriodicalId":477377,"journal":{"name":"Han-guk jeunggwon hakoeji","volume":"135 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135869475","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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