The Interplay of Leverage, Financing Constraints and Real Earnings Management: A Panel Data Approach

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F62690094%3A18450%2F22%3A50019465" target="_blank" >RIV/62690094:18450/22:50019465 - isvavai.cz</a>

Result on the web

<a href="https://www.mdpi.com/2227-9091/10/6/110" target="_blank" >https://www.mdpi.com/2227-9091/10/6/110</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.3390/risks10060110" target="_blank" >10.3390/risks10060110</a>

Result language

angličtina

Original language name

The Interplay of Leverage, Financing Constraints and Real Earnings Management: A Panel Data Approach

Original language description

Organizations are formed to gain long-term benefits. However, sometimes myopic management for feigned value enhancement led to the early demise of the firm. Further, to the best of our knowledge empirical role of financing constraints has not yet been explored between the relationship of leverage and earnings management practices. Therefore, the present study aims to empirically examine the impact of leverage on Real Earnings Management (REM) practices and how financing constraints influence this association. Employs a panel dataset of 3250 non-financial Chinese listed firms for a time period spanning from 2009 to 2018. Leverage is categorized into short-term, long-term, and total leverage to check the individual effects of each leverage category on REM practices. The data were analyzed through panel data fixed-effects and random-effects techniques as an econometric approach. First, consistent with positive accounting theory, the impact of total leverage on REM is positive. Second, compared to the long-term leverage, short-term leverage has more pronounced effects on managers&apos; opportunistic behavior towards using REM. Third, the influence of total leverage is higher (lower) on REM practices in financially unconstrained (constrained) firms. Fourth, the influence of short-term leverage on REM practices compared to long-term leverage is also weak in the financially constrained firms. These findings imply that, to avoid the consequences of managerial myopia, investors should abstain to invest in the firms that use higher amount of short-term debt and are financially unconstrained. This study is the first research to examine the impact of different leverage categories on REM practices in an emerging market, i.e., China, where the legal and financial structure is much poor.

Czech name

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Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

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OECD FORD branch

50206 - Finance

Project

—

Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2022

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Risks

ISSN

2227-9091

e-ISSN

2227-9091

Volume of the periodical

10

Issue of the periodical within the volume

6

Country of publishing house

CH - SWITZERLAND

Number of pages

21

Pages from-to

"Article Number: 110"

UT code for WoS article

000818410400001

EID of the result in the Scopus database

2-s2.0-85131260314