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The impact of regulatory design change on financial reporting outcomes: Evidence from a Quasi-natural experiment

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  • Ahn, Jae Hwan
  • Han, Jung Seung
  • Choi, Hoyong

Abstract

We investigate the impact of the financial supervisory architecture on financial reporting outcomes by exploiting a quasi-natural experiment in Korea. In 2008, Korea consolidated financial policy-making and supervisory functions into a single entity. Employing a difference-in-differences approach with cross-country data, we provide novel evidence indicating that the financial reporting quality of Korean firms significantly declined following this consolidation, relative to countries without similar structural changes. This finding remains robust after explicitly accounting for potential confounding effects arising from differences in economic, firm-specific, and regulatory characteristics. Our findings suggest that regulatory design is an important determinant of reporting decisions.

Suggested Citation

  • Ahn, Jae Hwan & Han, Jung Seung & Choi, Hoyong, 2025. "The impact of regulatory design change on financial reporting outcomes: Evidence from a Quasi-natural experiment," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s154461232500769x
    DOI: 10.1016/j.frl.2025.107510
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    More about this item

    Keywords

    Financial supervisory architecture; Financial policy-making; Regulatory supervision; Political cycle; Regulatory forbearance; Financial reporting outcomes;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • H1 - Public Economics - - Structure and Scope of Government
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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