Article2020

Earnings management and the informational and disciplining role of debt: evidence from Iran

29 citations0/0 files storedJournal of Asia Business Studies

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

Purpose The agency theory predicts that there are conflict of interests between managers and shareholders over free cash flow and major operating decisions. Earnings management can help managers hide and retain their private benefits of control. Given that, the purpose of this study is to investigate whether financial leverage reduces agency and information problems caused by earnings management. Design/methodology/approach The research uses a sample of annual data of 200 firms listed on the Tehran Stock Exchange during 2002-2016. The data required is obtained from the Rahavard Novin database. The research uses multivariate regression models that regress financial leverage on earnings management proxies and other determinants of capital structure. Findings The research documents that firms with higher income smoothing and the absolute value of discretionary accruals, as the proxies for earnings management, have higher financial leverage. The results suggest that a higher level of financial leverage can discipline managers and generate useful information about firm quality. Originality/value The study highlights the informational and disciplining role of debt in the presence of severe uncertainty about firm quality in a developing country.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 29 citations exist upstream.

References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1984Corporate financing and investment decisions when firms have information that investors do not have 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1997Legal Determinants of External Finance 1996Agency costs of free cash flow, corporate finance, and takeovers 1991Earnings Management During Import Relief Investigations 2005Performance matched discretionary accrual measures 1995What Do We Know about Capital Structure? Some Evidence from International Data

Cited by

2021Corporate governance and fraudulent financial reporting 2023Board characteristics and the likelihood of financial statements fraud: empirical evidence from an emerging market 2021The relationship between management entrenchment and financial statement fraud 2022Auditor characteristics and the financial reporting quality: the moderating role of the client business strategy

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.