The purpose of this paper is to examine whether a negative outcome (i.e. a sanction) of an inspection by Korea’s Financial Supervisory Service for an industry-leading company affects the accounting quality of other companies in the same industry. The premise is that when peer companies observe the negative results of such an inspection on a leader in their industry, they will be more concerned about their own risk during a future inspection and more likely to increase their accounting quality.,The authors conduct a mutivariate Oridnary Least Squares (OLS) regression using 11,476 South Korean samples from 2002 to 2016. The study uses ordinary least square regressions to test the hypotheses using discretionary accruals as a proxy for accounting quality.,The authors find that peer companies reduced their discretionary accruals in the next period and that this reduction is amplified according to the severity of the disciplinary action on the industry leader and the materiality of errors in that leader’s financial statements.,This finding contributes to the literature by providing the first evidence of a spillover effect of regulatory inspection on accounting quality that financial reporting sanctions not only affect the overall accounting quality of the sanctioned company but also that of its peers in the same industry. The authors expect this study to lead to future research on the effect of other regulations on industry-wide accounting quality.

中文翻译：

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监管会计检查对同行公司会计质量的溢出效应

本文的目的是检验韩国金融监督服务局对一家行业领先公司的检查的负面结果（即制裁）是否会影响同一行业中其他公司的会计质量。前提是，当同行公司观察到对行业领导者进行此类检查的负面结果时，他们将在未来的检查中更加关注自身的风险，并且更有可能提高其会计质量。使用2002年至2016年间的11,476个韩国样本进行了Orientnary Least Squares（OLS）回归。该研究使用普通最小二乘回归来检验假设，并使用酌定应计收益作为会计质量的指标。作者发现，在下一个时期，同行公司减少了他们的可支配应计费用，并且根据对行业领导者采取的纪律处分的严重性以及该领导者财务报表中错误的严重性，这种减少被放大。通过提供监管检查对会计质量的溢出效应的第一个证据，财务报告制裁不仅会影响受制裁公司的整体会计质量，而且还会影响同一行业的同行的整体会计质量。作者希望这项研究能导致其他法规对整个行业会计质量的影响的未来研究。