The purpose of this study is to test the effect of business strategy on valuation error. Business strategy includes managerial decision making and managerial tendency. In previous research, there is a negative relationship between business strategy and accounting quality. In this study, we try to confirm whether strategy tendencies affected valuation errors. In order to confirm empirically between business strategy and overvaluation, we use 8,117 firms that between 2006 and 2017 and listed in KSE and KOSDAQ. We calculated business strategy which is introduced by Bentley, Omer, and Sharp (2013). We also used the overvaluation method introduced in Rhodes-Kropf, Robinson, and Viswanathan (2005). The results show that the more the leading business strategy is, the greater the value error becomes. In the case of dividing into leading and defensive companies, the lead firms showed a significant positive correlation with the valuation errors, while the defensive firms showed the negative relationship with overvaluation. This study examined the business strategy and the overvaluation. we confirmed whether the management strategy deepens the evaluation error caused by the firm characteristics. The results are meaningful that we extended the study on the quality of financial reporting of leading strategic firms.

Abstract
1. Introduction
2. Literature Review
3. Research Design
    3.1. Research Model
    3.2. Business Strategy
    3.3. Overvaluation
    3.4. Control Variable
    3.5. Sample Selection
4. Empirical result
    4.1. Descriptive statistics
    4.2. Correlation
    4.3. Regression
    4.4. Additional test
5. Conclusion
References

• Sangkwon CHA(Graduate School of Hanyang University) Corresponding Author
• Sunpil HWANG(Graduate School of Hongik University)
• Yibae KIM(The Department of Accounting, Duksung Women’s University)