Byung Hee Lee | Seoul National University (original) (raw)

Papers by Byung Hee Lee

Review of Quantitative Finance and Accounting, 2013

This study investigates the governance role of a country’s legal and extra-legal institutions in ... more This study investigates the governance role of a country’s legal and extra-legal institutions in explaining the variations in firms’ cost of equity capital induced by concentrated ownership structures from 21 countries. Using four implied cost of equity proxies, the results show that the large ownership-control divergence of the ultimate owner has a positive and significant impact on the firm’s cost of equity capital. The finding lends support to the entrenchment effect in that the concentrated ownership structure increases the firm’s external financing cost. Further analyses demonstrate that the higher equity cost induced by the ultimate ownership structure is significantly reduced by a country’s stronger legal and extra-legal institutions, highlighting the governance role played by a country’s institutions in reducing the firm’s external financing cost.

The British Accounting Review, Nov 30, 2023

Management Science, 2016

With scarce empirical support, prior literature argues that managers tend to withhold good news a... more With scarce empirical support, prior literature argues that managers tend to withhold good news and promote bad news to preserve their bargaining power against labor unions. This paper provides empirical evidence of this rarely supported argument. Using comprehensive firm-level data from South Korea, where labor unions have a long tradition of making credible threats, we find that overall disclosure frequency is negatively related to labor union strength, and that this relation is more pronounced in firms with good news. We also find that firms with strong labor unions withhold good news during the labor negotiation period and release it in a gradual fashion afterward and that this pattern is more prominent than that of firms with weak or no unions, implying that managers time news disclosures according to bargaining schedules to achieve better outcomes in labor negotiations. These results are robust to various sensitivity tests.

Journal of Management Accounting Research, 2017

We examine the relation between labor union strength and investment efficiency using the comprehe... more We examine the relation between labor union strength and investment efficiency using the comprehensive firm-level data of Korean-listed companies. We find that the perceived underinvestment related to unionization documented in previous studies is attributable to a negative relation between union strength and investment in overinvesting firms. In fact, union strength is positively related to the level of investment in underinvesting firms. We further find that the relation between union strength and investment efficiency is more pronounced for chaebol firms where inefficient investments are more likely due to greater agency problems between the controlling and minority shareholders. Finally, we document that the investment has more positive value implications in firms with a stronger union. Our results suggest that unions play an important role as a nonfinancial stakeholder in curbing inefficient investments.

Review of Quantitative Finance and Accounting, 2014

This study investigates the governance role of a country's legal and extra-legal institutions in ... more This study investigates the governance role of a country's legal and extra-legal institutions in explaining the variations in firms' cost of equity capital induced by concentrated ownership structures from 21 countries. Using four implied cost of equity proxies, the results show that the large ownership-control divergence of the ultimate owner has a positive and significant impact on the firm's cost of equity capital. The finding lends support to the entrenchment effect in that the concentrated ownership structure increases the firm's external financing cost. Further analyses demonstrate that the higher equity cost induced by the ultimate ownership structure is significantly reduced by a country's stronger legal and extra-legal institutions, highlighting the governance role played by a country's institutions in reducing the firm's external financing cost. Keywords Corporate governance Á Ownership-control divergence Á Cost of equity capital Á Legal institutions Á Extra-legal institutions JEL Classification G15 Á G30 Á G38 Á K22

Seoul Journal of Business, 2021

Using market microstructure data, this study analyzes intraday market responses to corporate disc... more Using market microstructure data, this study analyzes intraday market responses to corporate disclosures subject to Regulation Fair Disclosure in Korea and examines whether the intraday market responses are affected by information uncertainty.
We show that corporate news is incorporated into stock prices in an efficient and timely
manner. We further document that positive stock returns and trading volume to good
news disclosures are stronger for firms with higher information uncertainty. Overall, our
evidence suggests that information uncertainty plays an important role in investors’
reactions to corporate disclosures.

Korean Government Accounting Review, 2020

This paper is based on one of the essays in my Ph.D. dissertation paper at Seoul National Unive... more This paper is based on one of the essays in my Ph.D. dissertation paper at Seoul
National University. I examined the intraday market responses to corporate disclosure
subject to Regulation Fair Disclosure (Reg FD) which has been implemented in South Korea since November 2002 by using market microstructure database. In particular, I explored differential trading behavior of nine different types of investors around fair disclosure (FD). I found that investors’ responses are immediate after the releases of FDs, e.g., price jumpup for two minutes after FDs and 80 (40) minute significant trading volume after positive (negative) FDs. Furthermore, I documented that it is difficult to make profits by using a short-term trading strategy based on positive FDs. The paper provides useful implications to capital market policy makers, financial market regulators, investors, financial analysts, etc. by highlighting the trading behavior of various different types of investors in the capital markets.

Research in International Business and Finance, 2021

In the paper, the co-authors and I provide evidence that IFRS adoption mitigates stock misevaluat... more In the paper, the co-authors and I provide evidence that IFRS adoption mitigates stock misevaluation. Analysing publicly traded stock in Korea surrounding IFRS adoption in 2011, we found that the gap between stock price and equity value estimate based on fundamentals, value-to-price (V/P) ratio, narrows following the IFRS adoption and that this narrowed gap is observed only for higher V/P firms. We further found that the return predictability of V/P decreases in the post-IFRS period. Our paper makes an important contribution by highlighting that IFRS adoption contributes to resolution of chronic undervaluation of Korean stocks, widely cited as Korea discount.

Drafts by Byung Hee Lee

This study examines whether financial statement comparability mitigates analysts’ accrual-relate... more This study examines whether financial statement comparability mitigates
analysts’ accrual-related over-optimism. Prior research shows that sell-side analysts do not fully incorporate accrual information in anticipating future earnings and thus, tend to issue more optimistic forecasts for firms with a higher level of accruals. Using the financial statement comparability measure developed by De Franco et al. (2011), we find that analysts’ over-optimism for accruals is significantly moderated for firms with a high degree of financial statement comparability. By disaggregating financial statement comparability, we further develop proxies for accrual comparability and cash flow comparability and find that the inverse relation between financial statement comparability and analysts’ over-optimism for accruals is driven mainly by accrual comparability rather than cash flow comparability. Our results are robust to alternative proxies for comparability, alternative metrics of accruals and cash flows, and controlling for other earnings attributes and analyst characteristics. Collectively, our evidence suggests that financial statement comparability helps analysts process and interpret accrual information, thereby improving their forecast accuracy.

We study the role and influence of Chief Accounting Officers (CAOs) by examining the relation bet... more We study the role and influence of Chief Accounting Officers (CAOs) by examining the relation between the presence of a CAO on the top management team and asymmetric timely loss recognition (ATLR). Using data collected from 10-Ks and proxy statements of S&P 1500 firms from 1999 to 2014, we find that the presence of a CAO is positively associated with the level of ATLR and that this positive relation is more pronounced when the Chief Financial Officer (CFO) does not have an accounting background. The results are robust to propensity score matching and a difference-indifferences analysis based on initial CAO appointments. We also find that a non-CAO chief accountant (e.g., corporate controller) does not have a similar impact on ATLR, suggesting that the role of a CAO is unique. We further show that CAOs exert more influence when they have relatively greater power within the top management team. Collectively, our evidence suggests that adding an accounting chief to the C-suite has a significant effect on financial reporting practices.