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Capital structure and value of reported earnings: evidence from an emerging market

Author

Listed:
  • Omar Farooq
  • Ziya Asgarov
  • Ayaz Guliyev
  • Toghrul Islam
  • Yuliya Kalinina
  • Zakir Pashayev

Abstract

This article documents a nonlinear impact of capital structure on the value of reported earnings in India during the period between 2009 and 2015. Our results show that earnings reported by firms with moderate level of debt are more valuable than earnings reported by firms with low or high level of debt. Our results are robust across various proxies of capital structure and across various sub-samples. This article argues that moderate level of debt is associated with low-agency problems, while low and high level of debt is synonymous to high-agency problems. Differences in agency problems result in reported earnings that have very different levels of relevance.

Suggested Citation

  • Omar Farooq & Ziya Asgarov & Ayaz Guliyev & Toghrul Islam & Yuliya Kalinina & Zakir Pashayev, 2017. "Capital structure and value of reported earnings: evidence from an emerging market," Applied Economics Letters, Taylor & Francis Journals, vol. 24(10), pages 690-694, June.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:10:p:690-694
    DOI: 10.1080/13504851.2016.1221036
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    Cited by:

    1. Marwan Mansour & Hamzeh Al Amosh & Ahmad Yuosef Alodat & Saleh F. A. Khatib & Mohammed W. A. Saleh, 2022. "The Relationship between Corporate Governance Quality and Firm Performance: The Moderating Role of Capital Structure," Sustainability, MDPI, vol. 14(17), pages 1-25, August.
    2. Huynh, Toan Luu Duc & Wu, Junjie & Duong, An Trong, 2020. "Information Asymmetry and firm value: Is Vietnam different?," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    3. Zakir Pashayev & Omar Farooq, 2019. "Capital Structure and Value of Advertising Expenditures: Evidence from an Emerging Market," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(4), pages 461-468, November.

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