The Impacts of Short-Selling Trading Information on Earnings Management : A Comparision between Chaebol and Non-Chaebol

Abstract

[Purpose] The aim of this study was to analyze the impacts of short selling trading information on earnings management in Korean capital market. Further, we investigated whether there is a difference between chaebol firms and non-chaebol firms. [Method] The short selling and firm performance variables are obtained from the KRX and TS2000. We analyze 2,495 data on KOSPI and KOSDAQ manufacturing firms for the period of 2012 to 2016. [Result] We find that short selling and earnings management has no significant associations in Korean capital market. However, when we controlled chaebol and analyzed the sample, chaebol firms show positive relations between short selling and earnings management, while non-chebol firms have negative(-) relations. [Implications] Those findings implies the short selling information affect the firm managers earnings management attitude. However. those impacts may be dependent on firms characteristics such as corporate governance. The results provide useful implications for information users of capital market and financial authorities.