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Debt structure and earnings management: A non-linear analysis from an emerging economy

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  • Thanh, Su Dinh
  • Canh, Nguyen Phuc
  • Ha, Nguyen Tran Thai

Abstract

The study investigates the relationship between debt ratio and earnings management based on the Panel Smooth Transition Regression (PSTR) model for the panel data of 432 non-financial Vietnamese listed firms over the period of 2006–2017. The estimated results properly show non-linear effects of debt ratio on earnings management in two regimes: (i) positive effect in low debt regime and (ii) negative effect in high debt regime. These results imply that debt ratio changes occur in earnings management before and after firms reach the optimal debt threshold point. Our research findings are robust to different debt ratio measures and methodologies.

Suggested Citation

  • Thanh, Su Dinh & Canh, Nguyen Phuc & Ha, Nguyen Tran Thai, 2020. "Debt structure and earnings management: A non-linear analysis from an emerging economy," Finance Research Letters, Elsevier, vol. 35(C).
    • Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319305240
    DOI: 10.1016/j.frl.2019.08.031
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    9. Tran Thai Ha Nguyen & Massoud Moslehpour & Thi Thuy Van Vo & Wing-Keung Wong, 2020. "State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam," Economies, MDPI, vol. 8(2), pages 1-21, June.
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    More about this item

    Keywords

    Debt ratio; Earnings management; Non-linear relationship;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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