Il-woon Kim

Manufacturing environments in South Korea, Japan and the United States of America: A note

This paper reports a comparative analysis of the manufacturing facilities and the degree of automation of major manufacturing corporations in South Korea, Japan and the United States. We suggest that South Korea is behind Japan and the United States in manufacturing technology, but is aggressively incorporating automated equipment or processes into the manufacturing system.

Target Costing Practices in the United States

Dr. Dan Swenson is an associate professor in accounting at Arizona State University – West Campus. While many Japanese companies have been using target costing as a strategic weapon for more than 30 years, only a small number of U.S. companies have been using target costing for any length of time. Hence, target costing is a relatively new and largely undocumented technique in the U.S. During the last decade, however, U.S. companies are increasingly interested in learning more about this powerful tool for managing costs in highly competitive market environments. The following article shows the results of the first broad empirical study on target costing practices in the United States. It also highlight the findings of several indepth case studies with successful target costing adopters.

The disclosure of environmental conservation costs and its relation to eco-efficiency: Evidence from Japan

Purpose This paper aims to examine whether the amount of costs disclosed as relating to environmental controls is associated with environmental performance in terms of carbon-based eco-efficiency, and whether any relation supports voluntary disclosure theory or legitimacy theory arguments. Further, this paper attempts to determine whether the relations differ across the initial Kyoto Protocol period. Design/methodology/approach In this study, the focus was on Japanese firms over the period from 2002 to 2012. Disclosed environmental control costs (capital expenditures and operating costs) were identified and eco-efficiency measures based on carbon emissions were calculated. Relations were tested for using regression models controlling for other potential impact factors. Findings This study’s results indicate a negative relation between disclosed levels of environmental control costs and eco-efficiency performance measures, and, for two of our three eco-efficiency metrics, this is more pronounced over the Kyoto Protocol period. Research limitations/implications These results support a legitimacy theory (as opposed to voluntary disclosure theory) explanation for the relation between the levels of disclosed environmental control costs and carbon-based eco-efficiency. Originality/value This study is the first to explore how flexibility in cost classification may be used by companies to foster a disclosure strategy.

An Application of Self-Organizing Maps to Financial Structure Analysis of Keiretsu versus Non-Keiretsu Firms in Japan

It has been argued that keiretsu in Japan allows its member firms to maintain a financial structure different from that of non-keiretsu member firms. In this paper, we use two different types of financial statement ratio analysis techniques to discover whether Kohonens self-organizing map (SOM) is able to uncover the differences in financial structures between keiretsu and non-keiretsu firms: ad hoc financial ratios and valuation-based financial ratios. We have found some evidence that SOM enables both financial analysis techniques to recognize different financial structures between the two groups of the firms. Implications of this finding for investment decisions have been discussed.

Cost Behavior of Environmental Protection and Social Contribution Activities: Korean Evidence

In this study, we focus on the corporate social responsibility (CSR) management of Korean firms and examine whether their CSR costs (particularly environmental protection and social contribution costs) are properly and effectively managed. Results of the study suggest that the disclosure of environmental capital and social contribution spending does not appear to be a function of quantitative materiality, on average and across time. It is also shown that environmental conservation costs (ECC) and social contribution costs (SCC) demonstrate symmetric behavior while R&D costs show asymmetric behavior, which implies that when sales are decreasing, ECC and SCC decrease proportionately but R&D costs decrease less than the percentage of sales decrease. SCC is stickier for firms that have a share of foreign investment, which implies that foreign investors require management to increase or maintain SCC. CSR activities measured with ECC, SCC, and R&D costs do not change as the ownership of major shareholders changes. Finally, no difference has been found between environmentally sensitive industries and non-sensitive industries in terms of the cost behavior of environmental conservation and social contribution activities.

Stock option modification under SFAS 123(R)

Purpose - – The purpose of this paper is to examine the motivations for and variations in terms of stock option modifications under Statement of Financial Accounting Standards (SFAS) 123(R). Stock options are used to motivate and retain employees. Unfortunately, when stock prices decline, existing options lose their incentive value. In response, firms look for ways to re-incentivize their employees. Their choices include issuing additional options and/or modifying existing grants. Design/methodology/approach - – We investigate the economic determinants of stock option modification post SFAS 123(R), such as financial reporting cost, shareholder/political cost and employee incentive and retention. Our analysis is based on 67 sample firms that modify their stock option plans from 2005 to 2008 and 67 control firms constructed based on size, industry, year and stock price performance for the prior five years. Findings - – The results show that loss firms are more likely to modify their options, which supports the argument that financial reporting costs influence the decision to modify. We find support for the shareholder/political costs hypothesis, as the overhang ratio is positively associated with the decision to modify. However, we find no evidence that modifications substitute for additional option grants. We find that politically sensitive larger firms are more likely to incorporate more shareholder friendly measures such as excluding executives from modification or providing shareholders the opportunity to vote on modification. Originality/value - – This is the first paper examining the economic determinants of stock option modification under SFAS 123(R). Our findings provide some insights regarding economic determinants of SFAS 123(R) for accounting policy-makers and investors.