The Impact of Leverage on Accrual-Based Earnings Management

• Post by: ams
• October 31, 2021
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ABSTRACT

This study investigated the Impact of Leverage on Accrual-Based Earnings Management for a sample of Nigerian companies, excluding financial and insurance companies, listed on the Nigerian stock exchange for the period 2000-2020. Secondary data were collected from the Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators. This study uses the Hribar and Collins (2002) model and the Kothari et al. (2005) model to calculate discretionary accruals. The OLS estimation technique was employed to empirically analyze the effect of firm leverage on earning management practices. Consistent with the ‘control hypothesis’ for debt creation, we find that a significant negative association between leverage and earnings management for Nigerian firms. The empirical results show that leverage limits earning manipulating activities of managers.

Keywords: Accrual-Based Earnings Management; Hribar and Collins (2002) Model; Kothari et al. (2005) model; Leverage || FULL PDF