동반성장 기업의 회계보수주의 수준 연구

곽영민,지상현,Kwak, Young-Min,Ji, Sang-Hyun 대한경영정보학회 2019 경영과 정보연구 Vol.38 No.1

The objective of our study is to examine the Earnings Quality of Win-Win Growth Corporate. The level of Win-Win Growth Corporate is measured by Win-Win Index of korea commission for corporate partnership. Earnings Quality is proxied by Accounting Conservatism that is measured by the method of Givoly and Hayn(2000). The samples of this study selected from listed corporate, consist of 3,608 observations can be collected from 2011 to 2017 at TS-2000. The result of this study can be summerized in the following. the Win-Win Growth has a significant positive relevance on Accounting Conservatism is the proxy of internal Earnings Quality. This means that Win-Win Growth corporate has a higher the Earnings Quality relatively. These results were supported by additional analysis that used the sample that is made up the Win-Win Growth Corporate completely. According to our study, we can expect that the Earnings Quality of Win-Win Growth corporate is true as steel. But this study have some limitation. Especially we can't explain the reason why the Win-Win Growth has a significant positive relevance on Earnings Quality. And, despite additional analysis, there are the limitation of controlling for endogeneity. We hope that our paper can help investor making a economic decision on investment and officials making a effective policy on the Win-Win Growth. 2008년 미국 서브프라임 금융위기 이후 더욱 심화된 국내 대기업-중소기업 간 경제 양극화의 해소 방안 중 하나로 동반성장정책(Win-Win Growth policy)의 중요성이 주목받고 있다. 특히 최근 다소 높은 수준의 최저임금 인상으로 중소기업의 경영난이 가중되고 있는 현 시점에서 동반성장 정책의 도입 및 확산은 대기업이 중소기업을 지배하는 한국 경제의 생태계를 대기업-중소기업 간 상생협력의 동반자적 경제 생태계로 전환하는 하나의 계기가 될 수 있을 것이다. 이에 본 연구에서는 동반성장 기업에 초점을 두고 동반성장 기업의 회계보수주의 수준을 검증하였다. 연구표본은 동반성장지수가 공시되기 시작한 2011년부터 2017년 한국거래소 상장 비금융업 12월 결산법인 총 3,608개 기업연도이다. 분석결과, 동반성장 수준이 높은 기업일수록 회계보수주의 수준이 높은 것으로 나타났다. 특히 이러한 결과는 동반성장평가 기업만을 대상으로 한 추가분석에서도 지지되었다. 본 연구는 최근 그 중요성이 더욱 높아지고 있는 동반성장에 주목하고, 동반성장 기업의 회계이익의 질을 회계보수주의 측면에서 검증한 첫 연구라는 점에서 연구의 의의가 있다고 할 수 있다. 아울러 본 연구가 한국 경제 생태계에 동반성장의 인식 및 확산에 조금이나마 기여할 수 있기를 희망한다.

혼합잉여의 유형별 가치관련성에 관한 연구

곽영민 ( Young-min Kwak ),백정한 ( Jeong-han Baek ) 한국생산성학회 2017 生産性論集 Vol.31 No.1

This study investigates whether firm`s share prices correctly reflect two types of dirty surplus items in Korean capital market. The first of these is commonly referred to as “other comprehensive income,” which is a component of comprehensive income that is excluded from reported earnings, and therefore violates clean surplus accounting. The second accounting measure we consider is “hidden dirty surplus”, which arises when a firm issues or reacquires its own shares in a transaction that does not record the shares at fair market value. An Example this kind of transaction is a conversion of a bond into common stock at other than fair market value. Unlike other comprehensive income, which is readily observable from the comprehensive income statement under K-IFRS, hidden dirty surplus is unobservable. Therefore, it is very difficult for investor to estimate the valuation impact of equity transactions that give rise to hidden dirty surplus. As a result, hidden dirty surplus is less likely to be correctly priced than are other comprehensive income. Specifically, we compute other comprehensive income(OCI) as sum (1) the change in value of available-for-sale securities. (2) the foreign exchange gains and losses arising from translations of financial, (3) the effective portion of gains and losses on hedging instruments in a cash flow hedge, (4) the change in value of property, and (5) the actuarial gains and losses on defined benefit plans. Based on Landsman et al. (2011), we compute hidden dirty surplus(HDS) as the change in the book value of common equity, less OCI, less net income, plus dividends, less share price at middle of fiscal year times change in common shares outstanding. To achieve the afore-mentioned research objectives, we first assess whether investors properly value each of these two types of dirty surplus by estimating a residual income forecasting equation and an attendant valuation equation that includes both of these components, using financial statement and stock price data from 2011-2014. We next employ Carhart`s (1997) four-factor market model in order to see market-based financial performance measured by stock return incorporates these two components of dirty surplus. Using the four factor model, we analyze whether investors can obtain abnormal returns by holding long position in firms with relatively large OCI or HDS and short position in firms with relatively small OCI or HDS. The analysis yields following key findings. First, other comprehensive income are irrelevant for forecasting abnormal very comprehensive income in next period and setting stock prices. Second, hidden dirty surplus is also irrelevant for forecasting abnormal very comprehensive income in next period but investors appear to undervalue the HDS component of income, i. e., over-value equity. Third, hedge returns are insignificant when the sample firms are ranked based on the other comprehensive income, but it is positive and significant when the HDS is used to rank the sample firms. These results are suggest that investors fail to understand the lack of persistence of hidden dirty surplus, and therefore apparently over-valuing firms that have hidden dirty surplus.

전환사채 발행공시에 따른 시장반응 및 시장반응 결정요인에 관한 연구 : 전환사채의 내재적 특성과 발행기업 특성을 중심으로

곽영민(Kwak, Young-Min) 한국국제회계학회 2012 국제회계연구 Vol.0 No.41

This study examines the announcement effects of offering convertible bonds using data for 236 firms listed in KRX over the period of 2001 to 2009. Furthermore, this study analyzes the impact of inherent characteristics in convertible bonds and characteristics of issuing firms on the announcement effects by controlling for the firm size, leverage ratio and etcetera. The proxies for characteristics of convertible bonds include PREM(conversion premium), GCB(a dummy variable that takes the value of one if convertible bonds are guaranteed, and zero otherwise), CB_SIZE(size of issuing amount). The characteristics of issuing firms are measured by the GROW(firms' growth potential), PROF(firms' performance), and CDQ(a dummy variable that takes the value of one if the company belongs to the investment grade issuers, and zero otherwise). The analysis yields following findings. First, The announcement effects of convertible bonds are associated with significantly negative abnormal returns. Second, GCB negatively influences the cumulative abnormal return around issue announcement of convertible bond. Finally, I find that the announcement effect of convertible bonds is positively related with the increases in growth of issuing firm and good credit rating.

최고경영자 교체유형과 이익조정 행태간의 관련성

곽영민 ( Young Min Kwak ),최종서 ( Jong Seo Choi ) 한국회계학회 2011 會計學硏究 Vol.36 No.2

최고경영자는 자신의 교체시점을 전후하여 사적 이익을 도모한 이익조정을 하는 것으로 알려지고 있다. 최고경영자의 교체에는 전임경영자와 신임경영자의 두 당사자가 연루되며 이에 따라 두 가지의 독립적인 이익조정 문제가 개입된다. 선행연구에 의하면 전임경영자는 자신의 마지막 재임기간에 보수수준을 증대시키거나 퇴임 후의 재취업 가능성을 제고할 목적으로 이익 상향조정의 동기를 갖는 반면 신임경영자는 미래에 양호한 이익을 보고하기 위한 가능성을 높이기 위하여 취임년도의 이익을 하향조정하려 한다고 제시되고 있다. 그러나 최고경영자의 교체를 전후한 이익조정의 동기는 획일적이 아니라 구체적인 교체유형에 따라 전임경영자와 신임경영자가 각각 상이한 이익조정의 동기를 지닐 수 있는 것으로 추론된다. 예컨대 전임경영자가 퇴임 후에도 회사 내부에 남아있는 경우에는 신임경영자가 이익조정을 할 수 있는 기회는 제한되는 반면 전임경영자가 회사에 잔류하지 않을 경우에는 취임년도의 이익조정을 시도할 수 있다. 또 신임경영자가 내부승진을 통해 영입되는 경우에는 외부영입의 경우에 비해 전임경영자와의 이해관계가 더 첨예할 수 있고 이익조정의 수단에 대해서도 더 정통할 수 있다. 이러한 관점에서 최고경영자의 교체시점을 전후한 이익조정에 대하여 검증력이 높은 분석을 확보하기 위해서는 이익조정의 유인과 기회에 차별적 효과를 초래할 수 있는 교체의 유형을 식별하는 것이 바람직할 것으로 판단된다. Anecdotal and empirical evidences suggest that the CEOs(Chief Executive Officer) engage in earnings management to bolster self-interests around the time of their change. CEO turnover involves two distinct decision makers, the departing(predecessor) CEO and the incoming(successor) CEO. Turnover then raises two independent earnings management issues: how the predecessor manages accounting earnings and how the successor manages them. Previous research suggests that a departing CEO tries to inflate earnings to obtain higher bonus in the last year of operations or to obtain better employment after retirement, while an incoming CEO deflates earnings in order to build reserves of reported income. However, type of CEO turnover provides different incentives for departing and incoming managers to make opportunistic earnings management. If the departing CEO stays with the company after retirement on the board of directors, the incoming CEO might not have opportunity for earnings management because of monitoring by former CEO. On the other hand, the incoming CEO takes a bath in his first year by recording big charges, so long as the departing CEO does not remain in the firm as a director. Therefore, to construct a powerful test of earnings management in the CEO turnovers, it is useful to identify types of CEO turnover that would provide differential incentives and opportunities for earnings management. This study was motivated by the suspicion that types of CEO turnover influence earnings management around CEO turnover. Specifically, we first examine the association between earnings management and types of departing CEO which were classified into voluntary departure and forced departure according to the rules used by Huson et al.(2001). Second, we investigate whether types of incoming CEO, whereby the types are classified into internal promotion and external recruitment, affect earnings management around CEO turnover. Finally, we explore whether earnings management around CEO turnover are distinguishable depending on the types of departing CEO and those of incoming CEO combined together. By understanding the motives or incentives for earnings management in conjunction with specific contexts of CEO turnover, one can develop adequate intuition into circumstances surrounding certain types of CEO turnover, which will help various stakeholder groups to make proper judgement in reviewing financial statement around CEO turnover. To achieve the afore-mentioned research objectives, we first examine the magnitude of discretionary accruals and abnormal real activities around the CEO turnover. In particular, we calculate discretionary accruals using the modified Jones model and variants of this model that correct for the bias due to extreme operating performance (Kothari, Leone and Wasley, 2005). Proxies for real earnings management activities are developed using the models suggested by Roychowdhury (2006) and Cohen and Zarowin (2010). We next examine whether the proxies of accrual and/or real earnings management are systematically related with the each type of CEO turnover using single equation and Heckman`s two stage equation models. In addition, we also examine whether earnings management around CEO turnover tends to be alleviated by sound governance mechanism but intensified by higher agency costs. The analysis yields following key findings. First, when we classified sample into four portfolios based on the joint types of departing CEO and incoming CEO, different patterns of earnings management are observed for each portfolio around the turnover. In particular, when departing CEO leaves the company voluntarily and incoming CEO is invited from outside the company, there is an evidence of upward earnings management in year t, when the incoming CEO is promoted from inside the company, he or she did not manage earnings on the other hand. And, there was an evidence indicating upward and downward earnings management in year t-1 and year t, respectively, when former CEO leaves the company under forced turnover context and incoming CEO is promoted from inside the company. However, we can not observe earnings management, when former CEO leaves the company on a compulsory basis and incoming CEO is invited from outside the company. These results suggest that CEOs have differential incentives for earnings management around their turnover depending on the types of departing and incoming CEO combined together. Second, after controlling for the possible endogeneity stemming from the linkage between corporate performance and executive change by using Heckman`s two stage approach, we find evidence to support previous results based on single equation-based analysis. Finally, the opportunistic earnings management around CEO turnover tends to be alleviated by sound governance mechanism but intensified by higher agency costs. This paper contributes to the existing earnings management literature in Korea in a number of respects. First, we incorporate recent innovations in measuring earnings management into our research design by combining the accrual and real activity based metrics and show that these innovations substantially alter the inferences in the CEO turnover context. The results provided in this paper mark significant evidence to support that the circumstances surrounding certain types of CEO turnover provide incentives for departing and incoming CEO to engage in opportunistic earnings management. Second, the results documented in this paper provide an important implication for diverse interest groups participating in the CEO turnover decisions and a logical underpinning on the relationship between the CEO turnover and quality of accounting information. The evidence obtained herein suggests the need for more rigid screening for financial statement around CEO turnover.

한국제약산업의 가치동인

곽영민(Young Min Kwak),최종서(Jong Seo Choi) 한국경영학회 2013 經營學硏究 Vol.42 No.4

R&D and sales promotion expenditures constitute two essential value-drivers that help to enhance operating performance and corporate values. The former expenditure serves the role of long-term value-creator whereas the latter contributes to create mid to short-term economic benefits. This paper conducts empirical investigation into the differential economic effects of R&D versus sales promotion efforts of domestic pharmaceutical industry, by estimating a couple of equations, one for earnings and the other for valuations on separate basis. This study employs time-series and cross-sectional analyses in a complementary way, using firm-specific timeseries as well as industry-wide cross-sectional data with a view to testing lagged investment effects of respective expenditures. In particular, sales promotion expenditure is introduced to reflect the controversial rebate practice prevalent in the domestic pharmaceutical business. Due to the secretive nature of the rebate, however, it is practically impossible to measure the exact amounts devoted to such purposes, which necessitates the development of proxy variables. We devise several alternative metrics by combining selected income statement items in various ways, which are considered to be related to the illegal promotional activities. We also replicate the tests of value relevance of R&D versus sales promotion expenditures for electronic device industry, which is intended to serve as a control sample. By comparing the differential value relevance implications of afore-mentioned expenditures between the two technology-intensive industries, we expect to bring the unique feature of the domestic pharmaceutical business conventions into brighter light. We use the sample of pharmaceutical companies listed in the Korea Stock Exchange over the period of 1990 to 2010. Major findings of the analyses are summarized as follows. First, in a cross-sectional analysis using the entire industry sample, whereby Fama-McBeth tests are employed to test the statistical significance of associations between the constructs of interests, current and past R&D expenditures did not exhibit any statistically significant influence on either current operating income or firm valuation. On the contrary, current and past sales promotion expenditures affect operating performance and firm values in a significantly positive way both contemporaneously and with lags of up to 2 periods. Second, the afore-mentioned relationships between the two types of expenditures and operating performance as well as valuations are reconfirmed in firm-level time-series analyses from majority of individual sample firms. These results indicate that domestic pharmaceutical firms tend to manage operating performance and firm values by focusing on promotional efforts, sometimes even in illegal manners, rather than striving to achieve new technologies and develop new products via consistent R&D endeavors. Third, in an additional analysis, we conduct comparative analyses between pharmaceutical versus electronic device industries by estimating the earnings and valuation equations for the two industry samples simultaneously. The results for the two industry samples stand out in sharp contrast against each other, such that the value relevance of R&D and sales promotion expenditures for the control electronic industry sample exhibit precisely the opposite pattern of the pharmaceutical industry sample. The fact that rebate-type sales promotion expenditure shows statistically significant value relevance only in pharmaceutical industry may well demonstrate the peculiarity inherent in domestic industry environment, characterized by the lack of innovative energy and harsh competition restricted in the domestic market setting. The results of this study provides an empirical evidence in support of the wide spread recognition that domestic pharmaceutical industry used to rely on sales promotional activities including illegal rebate practices largely to mai

최고경영자의 경영재량권과 목표이익 달성을 위한 이익조정

곽영민 ( Young-min Kwak ),박진모 ( Jin-mo Park ) 한국생산성학회 2017 生産性論集 Vol.31 No.4

This study examines the relation between CEO centrality and earnings management to avoid losses and earnings decreases in Korea. Agency theory suggests that CEO centrality exacerbates agency problem as powerful CEOs tend to be overconfident and choose risky corporate strategies. On the other hands, Stewardship theory asserts that CEO centrality may be ideal for firm value and performance because of the unity of leadership and control it presents. While those two views are predicting contradictory impact of CEO power concentration on earnings management, empirical research examining the association between CEO centrality and earnings management in Korea does not exist, to our knowledge. As such, this study is the first that provides Korean evidence on the relationship between CEO centrality and earnings management. To achieve the afore-mentioned research objective, we examine whether the earnings management to losses and earnings decreases is systematically related with the proxy of CEO centrality using a ordinary logistic regression model and two stage least squares model (2SLS). Proxy for CEO centrality is developed using CEO pay slice suggested by Bebchuk et al.(2011). In particular, the CEO pay slice (CPS) calculated as a ratio of total CEO compensation to the total compensation of all directors in the board, captures the relative importance of CEO within the management team. To identify earnings management to losses and earings decreases, we classify suspected firms that show small positive earnings or small earnings increases according to Burgstahler and Dichev(1997). Our sample is drawn from companies listed on the KRX for which the information of executive compensation is available. Up to 2012, information of individual executive compensation was not mandatory disclosure item in annual reports, but from 2013 Korean listed firms should be required to disclose their executives’ pay information in annual reports if total compensation of an individual executives is more than 500 million won a year, following recent revisions to the capital market act. Thus our sample period covers 3 years from 2013-2015 and the final sample includes 927 firm-years from both manufacturing and non-manufacturing industries. We find a positive and significant relationship between CEO centrality and earnings management to avoid losses but not earnings decreases. This finds is robust to additional test(2SLS). These results indicate that CEO centrality restricts capabilities for monitoring and checking on inefficient managerial decision, which will lead to increased propensity to earnings management, thereby can pass on the economic cost to the outside investors. The contribution of this study is as follows. First, this study provides the first comprehensive Korean evidence of how CEO centrality is related to earnings management. Second, we incorporate recent innovations in measuring corporate governance system into our research design by using CEO pay slice as an empirical proxy of CEO centrality. Third, the results documented in this paper provide significant policy implications regarding the future directions on the regulatory measures to be implemented with the regard to the corporate governance system in the Korean capital market. The evidence obtained herein suggests the need for more rigid screening schemes to control earnings management in a situation when powerful CEO can influence over the board and also for adequate measures to be taken to ensure that the interests of the outside investors are properly protected from dominant CEO’s arbitrariness.

K-IFRS 제1115호의 도입 효과: 비정상 매출액 수준과 매출액 정보의 가치관련성을 중심으로

곽영민 ( Young Min Kwak ),백정한 ( Jeong Han Baek ) 한국회계학회 2021 회계저널 Vol.30 No.3

본 연구는 2018년부터 국내 상장기업 등에 의무 적용된 신-수익기준서인 K-IFRS 제1115호의 도입 효과를 비정상 매출액 수준과 매출액 정보의 가치관련성 변화에 초점을 두어 실증적으로 검증한다. 이 때 비정상 매출액 수준은 Stubben(2010)의 연간모형과 분기모형을 이용하여 추정하며 가치관련성 모형은 Bowen et al.(2002)에 기초하여 유도한다. 2016년부터 2019년까지 국내 상장기업을 대상으로 분석한 주요 결과를 요약하면 다음과 같다. 첫째, K-IFRS 제1115호 도입 이후 비정상 매출액 수준이 유의하게 감소한 것으로 나타났다. 둘째, 동 기준서 도입 후 주식가격에 대한 매출액 정보의 증분적 가치관련성이 더욱 증가한 것으로 관찰된다. 셋째, 상술한 결과가 산업 특성 예컨대, 과거 일관된 수익모형을 적용하지 않고 있어 동 기준서의 변경 효과가 비교적 클 것으로 예측되는 산업 여부 등에 따라 차이를 보이는 것으로 나타났다. 끝으로, 수익기준서 변경 후 발생액 외에 또 다른 매출액 조정 수단으로 활용 가능한 실물조정 척도인 비정상 영업현금흐름 수준도 유의하게 감소하고 있음을 확인하였다. 이처럼 본 연구의 결과는 K-IFRS 제1115호의 도입 효과가 소속산업의 특성에 따라 일부 차이를 보이고 있기는 하나 전반적으로 경영자의 기회주의적 회계선택을 제한하고 있으며 이에 따라 매출액 정보의 유용성이 한층 더 제고되고 있음을 보여준다. 다만, 본 연구는 K-IFRS 제1115호 도입 직후 2년까지를 분석대상 기간으로 고려한 초기 실증 연구로 향후 표본기간을 확장한 후속연구에서 연구결과가 달리 관찰될 여지가 있다. 따라서 본 연구에 결과에 대해서는 다소 제한된 해석이 필요할 것으로 판단된다. This paper investigates the effect of the adoption of IFRS 15 “Revenue from contracts with customers”, mandatory from 1st January 2018. To achieve the research objectives, we empirically analyzed whether abnormal sales levels and the value relevance of sales information are changing around IFRS 15 adoption by using listed companies in Korea form 2016~2019. In this study, abnormal sales levels are estimated using annual and quartely model proposed by Subben(2010), and the value relevance model is derived on the basis of Bowen et al.(2002). The analysis yields following key. First, on the basis of abnormal sales metrics, we find that across multiple models, the level of abnormal sales has significantly decreased after IFRS 15 adoption. Second, we find that the incremental value of sales information on stock prices has increased after IFRS 15 adoption. Third, afore-mentioned results were observed differently according to the type of industries because the effect of IFRS 15 adoption may vary depending on whether the industry has applied a consistent revenue model in the past. Finally, even after IFRS 15 adoption, it was not observed that the means of sales managements were replaced from discretionary accruals to real activities such as abnormal CFO. In summary, the evidence obtained herein suggests that although the effect of IFRS 15 adoption varies in part according to the type of industries, overall, it restricts managers' opportunistic accounting choices, thereby further enhancing the usefulness of sales information. However, since we only used early periods of the IFRS 15, the result of this paper should be interpreted in a limited manner.

투자심리가 경영자 예측정보의 예측오차에 미치는 영향

곽영민(Young-Min Kwak),박진모(Jin-Mo Park) 대한경영학회 2020 大韓經營學會誌 Vol.33 No.3

신규상장기업의 이익조정과 생존가능성의 관련성: 코스닥 시장을 중심으로

곽영민 ( Young Min Kwak ),최종서 ( Jong Seo Choi ) 한국회계학회 2011 회계저널 Vol.20 No.3

최고경영자에 대한 경영권 집중화 수준과 기업가치

곽영민 ( Young Min Kwak ),김현진 ( Hyun Jin Kim ) 한국회계학회 2017 회계학연구 Vol.42 No.1

본 연구에서는 최고경영자에 대한 경영권 집중화가 기업가치에 어떠한 영향을 미치는가를 실증적으로 확인하고자 한다. 구체적으로 본 연구에서는 Bebchuk et al. (2011) 이 제시한 방법에 따라 경영진의 보상 총액에서 최고경영자 1인의 보상이 차지하는 비율(CEO pay slice: CPS)로 기업의 경영권 집중화 수준을 측정한 후 그러한 경영권 집중화 수준과 기업가치 간의 관련성을 실증적으로 분석하였다. 특히, 경영권 집중화 수준이 기업의 소유-지배구조나 경영성과 등에 따라 내생적으로 유도된 변수일 가능성을 통제하기 위해 도구변수 접근법에 따른 2SLS의 추정을 OLS 추정과 병행하여 분석에 이용하였다. 나아가 본 연구에서는 경영권 집중화 수준이 경영자의 비효율적 투자의사결정 성향에 어떠한 영향을 미치는가를 추가적으로 검토함으로써 경영권 집중화와 기업가치 간의 인과관계 구조에서 비효율적 투자의사결정이 매개변인이 되고 있는가를 탐색하고자 하였다. 분석결과에 따르면 경영자에게 경영상의 권한이 집중될수록 기업가치가 악화되고 과잉투자와 같은 비효율적 의사결정 경향이 보다 현저해 지고 있는 것으로 관찰되었다. 이는 최고경영자 1인에게 경영권이 집중되어 있을 경우 과잉투자와 같은 경영자의 비효율적 의사결정이 효율적으로 견제되지 못하고 방치됨에 따라 주주부가 희생되는 경향이 더욱 커지고 있음을 시사한다. This paper studies the empirical relation between CEO centrality and firm value in Korea using a sample of 453 firm-years during 2013-2015. We measure CEO centrality by CEO pay slice suggested by Bebchuk et al.(2011). Our main findings can be summarized as follows. First, we find a negative and significant relationship between CEO centrality and corporate financial performance measured by Tobin`s Q, after controlling for the possible endogenous problem by using 2SLS model. Second, CEO centrality is correlated with higher likelihood of inefficient investment decision, in particular, over-investment. These results indicate that CEO centrality restricts capabilities for monitoring and checking on inefficient managerial decision, which will lead to increased propensity to over-investment, thereby can pass on the economic cost to the outside investors.