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The impact of leverage on accrual-based earnings management: The case of listed French firms

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  • Lazzem, Safa
  • Jilani, Faouzi

Abstract

The primary aim of this study is to examine the impact of leverage increases on accrual-based earnings management practices for a sample of French firms indexed in CAC All-Tradable during a period from 2006 to 2012. We use panel data to calculate discretionary accruals and to empirically analyze the effect of firm leverage on the opportunistic behavior of managers. Consistent with debt covenants hypothesis, we find that firm leverage has a positive effect on earnings management for French firms. The empirical results show that leverage increases provide incentives for managers to manipulate earnings.

Suggested Citation

  • Lazzem, Safa & Jilani, Faouzi, 2018. "The impact of leverage on accrual-based earnings management: The case of listed French firms," Research in International Business and Finance, Elsevier, vol. 44(C), pages 350-358.
    • Handle: RePEc:eee:riibaf:v:44:y:2018:i:c:p:350-358
    DOI: 10.1016/j.ribaf.2017.07.103
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    2. Manar Al-Mohareb & Mahmoud Alkhalaileh, 2019. "The Association between Earnings Management and Capital Structure: An Empirical Study on Jordanian Firms Listed in Amman Stock Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 106-112.
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    5. Sun, Hongyan & Yuen, Desmond C.Y. & Zhang, Jiahang & Zhang, Xu, 2020. "Is knowledge powerful? Evidence from financial education and earnings quality," Research in International Business and Finance, Elsevier, vol. 52(C).

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