Refinancing Pressure and Earnings Management: Evidence from Changes in Short-Term Debt and Discretionary Accruals
16 Pages Posted: 28 May 2012 Last revised: 21 Feb 2018
Date Written: February 20, 2018
Abstract
In this paper, we investigate whether refinancing pressure leads managers to manipulate earnings. Our tests examine the relation between changes in short-term debt and discretionary accruals. We find that firms have higher discretionary accruals during periods of increasing short-term debt. We also find that this relationship is stronger for firms that ultimately obtain new loan financing. Finally, we show that the presence of investment grade debt attenuates the relationship between discretionary accruals and refinancing pressure.
Keywords: capital structure, accruals
JEL Classification: G32, M41
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Paper statistics
Recommended Papers
-
Detecting Earnings Management: A New Approach
By Patricia Dechow, Amy P. Hutton, ...
-
A Review of the Earnings Management Literature and its Implications for Standard Setting
-
Errors in Estimating Accruals: Implications for Empirical Research
By Daniel W. Collins and Paul Hribar
-
The Economic Implications of Corporate Financial Reporting
By John R. Graham, Campbell R. Harvey, ...
-
The Economic Implications of Corporate Financial Reporting
By John R. Graham, Campbell R. Harvey, ...
-
On the Association between Voluntary Disclosure and Earnings Management
By Ron Kasznik
-
Performance Matched Discretionary Accrual Measures
By S.p. Kothari, Andrew J. Leone, ...
-
The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors
By Ilia D. Dichev and Patricia Dechow