The Effect of Mandatory Disclosure of Corporate Governance Report on Firms’ Matching Principle: Focusing on Revenue-Expense Matching

초록

This study examines whether the mandatory Corporate Governance Report disclosure regime in Korea enhances revenue-expense matching, a fundamental property of earnings quality. Using a staggered difference-in-differences design on a sample of KOSPI-listed firms from 2011 to 2021, the study finds that firms subject to the mandate exhibit a significantly stronger contemporaneous association between revenues and expenses relative to non-subject firms. The main finding shows qualitatively the same results for robust alternative fixed-effects models and constant sample. This improvement is robust to controlling for concurrent regulatory shocks, including the New External Audit Act, and persists in stringent fixed-effects specifications. Cross-sectional tests reveal that the effect is most pronounced in firms with low foreign ownership, suggesting that regulatory intervention substitutes for weak external monitoring. Furthermore, this study documents that substantive compliance with Board of Directors indicators, rather than mere checkbox adherence, is the primary channel driving this improvement. The findings suggest that mandatory governance disclosure imposes reputational and monitoring costs that discipline internal controls, thereby generating positive spillovers for financial reporting quality. These results provide policy implications for the efficacy of corporate governance disclosure regimes in emerging markets.

키워드