How Do Financial Constraints Relate to Financial Reporting Quality? Evidence from Seasoned Equity Offerings

Kurt, Ahmet C.

doi:10.1080/09638180.2017.1279556

Cited by 40 publications

(27 citation statements)

References 72 publications

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“…This link has not been examined before. The argument put forward here is in accordance with opportunism hypothesis in Kurt (2018), (Bergstresser & Philippon, 2006;Louis & Sun, 2016).…”

Section: H1: Managers Are Less Likely To Engage In Accruals-based Earnings Management When Its Accounting Comparability Is Highersupporting

confidence: 86%

“…As a consequence, constrained firms are more likely to employ income-increasing earnings management to falsely impress outsiders regarding their performance. In line with this view, Kurt (2018) and Moreira (2006) find that financial constraints are positively related to earnings management. Financial statement comparability should make it more costly to conduct earnings management, but financially constrained firms may find it more compelling to perform earnings management.…”

Section: H1: Managers Are Less Likely To Engage In Accruals-based Earnings Management When Its Accounting Comparability Is Highermentioning

confidence: 76%

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Accounting comparability and accruals-based earnings management: Evidence on listed firms in an emerging market

Liêm¹

2021

Cogent Business & Management

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Users of financial statements are in a better position to evaluate the performance of the firm in question if its accounting system and methods are comparable with those of other firms. Even though accounting comparability is markedly beneficial, the empirical studies on its impact on earnings management are scant, especially in the context of developing countries that have not applied International Financial Reporting Standards (IFRS). In the present study, we examined the association between comparability and accruals-based earnings management, considering the moderating impacts of financial constraints in the context a developing economy. The article used a sample of 502 Vietnamese non-financial listed firms from 2010 to 2019. Three proxies of comparability and two measures of accruals-based earnings manipulation, together with several empirical strategies, are employed. First, the research provides evidence suggesting that comparability reduces firms' tendency to engage in earnings management. Furthermore, there is evidence suggesting that firms could give more weighting to the comparability with a small number of firms rather than various firms in the same industry. Second, we are the first to identify that financial constraints have a moderating effect: more ABOUT THE AUTHOR PhD Liem Nguyen is a research fellow at Center for Economic and Financial Research cum lecturer of Faculty of Finance & Banking, University of Economics and Law. His main interests are earnings management, corporate governance and corporate social responsibility. He has published several papers on quality journals including Cogent Business & Management, Sustainability, Pacific Accounting Review, etc.

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“…This link has not been examined before. The argument put forward here is in accordance with opportunism hypothesis in Kurt (2018), (Bergstresser & Philippon, 2006;Louis & Sun, 2016).…”

Section: H1: Managers Are Less Likely To Engage In Accruals-based Earnings Management When Its Accounting Comparability Is Highersupporting

confidence: 86%

Section: H1: Managers Are Less Likely To Engage In Accruals-based Earnings Management When Its Accounting Comparability Is Highermentioning

confidence: 76%

Accounting comparability and accruals-based earnings management: Evidence on listed firms in an emerging market

Liêm¹

2021

Cogent Business & Management

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“…In corporate finance, a vital concern is the influence of financial constraints on performance and behavior of firms (Li and Luo 2019). Kurt (2018) indicates that financial constraints have great influence on the accounting information quality. Further, while report strong relationship between financial constraints and investment behavior of firms, Chen and Wang (2012) document that the decisions of stock repurchase are impacted by the financial constraints.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Environmental Sustainability Disclosure on Stock Return of Saudi Listed Firms: The Moderating Role of Financial Constraints

Alsahlawi

Chebbi

Ammer

2021

IJFS

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Environmental sustainability represents nowadays a significant factor for business sector. Firms carry out many initiatives to develop environmental practices. Investors increasingly consider environmental discloser by firms and integrate this disclosure into the investment decision-making process. Using a database of Saudi listed firms, this study adds to the literature by examining the relationship between the environmental sustainability disclosure and stock return and whether this relationship is moderated by the financial constraints. We find that the environmental sustainability disclosure has significant and negative impact on stock return, indicating that investors do not consider environmental disclosure when valuing the stocks. Furthermore, our results propose that the negative impact of environmental disclosure on stock return is more evident in firms with financial constraints. This study provides managerial implications for regulatory authorities, firms and investors. The environmental practices can be value relevant. However, these practices need to be efficiently integrated into stock valuation.

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“…Thus, such firms might be tempted to cut down resources to reduce costs, hence, increase profit to meet earnings benchmarks. In line with this view, Kurt (2017) predicts and finds that constrained firms engage in income‐increasing earnings management more aggressively than unconstrained firms, around seasoned equity offerings. If such cost cutting improves firm performance, then debt providers are likely to be less concerned about the default risk.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 90%

Debt maturity structure and cost stickiness

Habib

Costa

2020

J Corp Accounting Finance

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This paper investigates the association between debt maturity structure and cost stickiness. One view in the cost stickiness literature suggests that managers deliberately continue to expand resources for their own private benefit, despite a decrease in the activity level. We examine whether short‐maturity debt constrains such opportunistic cost stickiness. We find evidence supporting this hypothesis. We further document that availability of free cash flows, earnings management incentive, and the structure of executive compensation all exacerbate the agency problem‐induced cost stickiness, but that short‐maturity debt constrains those sources of cost stickiness. We contribute to the scant body of empirical research that explores the potential factors that could attenuate cost stickiness.

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How Do Financial Constraints Relate to Financial Reporting Quality? Evidence from Seasoned Equity Offerings

Cited by 40 publications

References 72 publications

Accounting comparability and accruals-based earnings management: Evidence on listed firms in an emerging market

Accounting comparability and accruals-based earnings management: Evidence on listed firms in an emerging market

The Impact of Environmental Sustainability Disclosure on Stock Return of Saudi Listed Firms: The Moderating Role of Financial Constraints

Debt maturity structure and cost stickiness

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