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Earnings Manipulation and Adjustment Speed towards an Optimal Leverage

Advances in mathematical finance & applications, 2021-07, Vol.6 (3), p.1-21 [Peer Reviewed Journal]

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Title:
Earnings Manipulation and Adjustment Speed towards an Optimal Leverage
Author: Abbas Aflatooni ; Mahdi Khazaei ; Zahra Nikbakht
Subjects: accrual-based earnings manipulation ; leverage deviation ; optimal leverage ; real activities manipulation ; speed of adjustment
Is Part Of: Advances in mathematical finance & applications, 2021-07, Vol.6 (3), p.1-21
Description: This study examines whether the firms’ leverage adjustment speed is influenced by real and accrual-based earnings manipulation over the period 2006-2019. We find evidence suggesting that the leverage adjustment speed in firms with a higher level of real and accrual-based earnings manipulation is slower than that of other firms. Specifically, we show that under-levered (over-levered) firms with a higher level of earnings manipulation tend to adjust their actual leverage toward an optimal level, faster (slower) than that of other firms. These results are robust to different metrics for real and accrual-based earnings management, an alternative set of leverage determinants, alternative sample periods, and various estimation methods.
Publisher: Islamic Azad University of Arak
Language: English
Identifier: ISSN: 2538-5569
EISSN: 2538-5569
DOI: 10.22034/amfa.2020.1912619.1500
Source: Open Access: DOAJ Directory of Open Access Journals

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