IDEAS home Printed from https://ideas.repec.org/a/taf/raaexx/v27y2020i2p151-172.html
   My bibliography  Save this article

Real earnings management and the cost of debt capital: international evidence

Author

Listed:
  • Ji Hye Kim
  • Sang Ho Lee
  • Yong Keun Yoo

Abstract

This study examines the association between the extent of real earnings management and the cost of debt capital in an international setting. Using a sample of 14,654 observations across 18 countries from 1987 to 2013, we find that on average, the extent of real earnings management is positively associated with the cost of debt capital. Moreover, we find that debt investors impose more premiums on the cost of debt capital for the firms in countries with more developed debt markets. This study contributes to the literature in the following ways: To begin with, this is the first international study to examine the effect of firms’ real earnings management on the cost of debt capital. Next, this study suggests that the association between the extent of real earnings management and the cost of debt capital varies depending on the institutional environment of the country a firm is based in. Finally, this study implies that financial policy makers need to extend bond market development in order to encourage debt investors to price the negative effects of real earnings management on the firm’s future performance.

Suggested Citation

  • Ji Hye Kim & Sang Ho Lee & Yong Keun Yoo, 2020. "Real earnings management and the cost of debt capital: international evidence," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 27(2), pages 151-172, March.
    • Handle: RePEc:taf:raaexx:v:27:y:2020:i:2:p:151-172
    DOI: 10.1080/16081625.2018.1518148
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/16081625.2018.1518148
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/16081625.2018.1518148?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roman Blazek & Pavol Durana & Katarina Valaskova, 2020. "Creative Accounting as an Apparatus for Reporting Profits in Agribusiness," JRFM, MDPI, vol. 13(11), pages 1-19, October.
    2. Fernando Comiran & Subprasiri Siriviriyakul, 2023. "Detecting overproduction: Evidence from inventory write‐down," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3351-3386, September.
    3. Ahsan Habib & Dinithi Ranasinghe & Julia Yonghua Wu & Pallab Kumar Biswas & Fawad Ahmad, 2022. "Real earnings management: A review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4279-4344, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:raaexx:v:27:y:2020:i:2:p:151-172. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/raae20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.