Is Earnings Management a Technique to Reduce Cost of Capital? Exploratory Study on Indian Companies

Patro, Archana; Kanagaraj, A.

doi:10.17265/1548-6583/2016.05.001

Cited by 3 publications

(3 citation statements)

References 22 publications

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“…This result suggests that by using a powerful corporate governance system, by declining the information asymmetry (increasing transparency) and agency conflict, we would be able to enhance the quality of financial reports and by strengthening the capital market and attracting financial suppliers and investors, absorb the required financial resources of the firm by a lower rate. These results are in line with those of Adnan and Qubbaja (2019), Bozec and Bozec (2011), Mazzotta and Veltri (2012), Teti et al (2016), Gupta et al (2018), Zhu (2014), Srivastava et al (2019) and Patro & Kanagaraj (2016), but are in contrast with those of McInnis (2010) and Juniarti and Natalia (2012).…”

Section: Discussionsupporting

confidence: 90%

“…These studies indicate good enterprise management will reduce the cost of equity. For example, Adnan and Qubbaja (2019), Bozec and Bozec (2011), Mazzotta and Veltri (2012), Srivastava et al (2019) and Patro & Kanagaraj (2016) showed that there is a negative relationship between corporate governance and cost of equity. Claessens and Yurtoglu (2013) concluded that bettergoverned firms have easier access to external finance in emerging economies, resulting in a lower cost of equity.…”

Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

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Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

Salehi¹,

Arianpoor²,

Dalwai³

2020

JAFEB

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The purpose of this study was to investigate the impact of corporate governance index on the cost of equity in companies listed on the Tehran Stock Exchange. This study collects data from 975 observations during the period 2012 to 2018 to test the hypotheses using multiple linear regression model for the panel data. In this research, the independent variable of corporate governance index comprises of 27 specific corporate governance attributes. The results of hypothesis testing showed that corporate governance has a negative and significant effect on the rate of capital cost. In other words, the quality of corporate governance can lower the rate of capital cost. This result suggests that, by using a powerful corporate governance system and by declining the information asymmetry (increasing transparency) and agency conflict, we would be able to enhance the quality of financial reports. It would strengthen the capital market, attract financial suppliers and investors, and absorb the required financial resources of the firm by a lower rate. The findings of the study suggest that companies are able to reduce the cost of equity by establishing strong corporate governance. This conclusion suggests the importance and effectiveness of corporate governance in the cost of equity.

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Section: Discussionsupporting

confidence: 90%

Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

Salehi¹,

Arianpoor²,

Dalwai³

2020

JAFEB

View full text Add to dashboard Cite

show abstract

“…Many previous studies related to the cost of capital have been carried out include governance (AlHares, 2020; Arslan, 2019;Khan et al, 2020;Pham et al, 2012), litigation risk (Qin et al, 2020), corporate social responsibility disclosure (Atan et al, 2018;Ellili, 2020;Gjergji et al, 2021;Johnson, 2020;Rahmasari, 2013), economic policy uncertainty (Xu, 2020), risk disclosure (Almania, 2019;Liu, 2020), leverage (Battisti et al, 2020;Rajverma et al, 2019), environmental disclosure (Anh, 2020;Haninun et al, 2019), integrated reporting (Vena et al, 2019), ownership structure (Rajverma et al, 2019), dividend policy (Rajverma et al, 2019), disclosure quality (Ezat, 2019), intellectual capital disclosure (Gomes et al, 2019), employee shareholding (Aubert et al, 2017), information risk (Safdar & Yan, 2016), earnings management (Patro & Kanagaraj, 2016), board of directors concentration (Upadhyay, 2014), excess control (Bozec et al, 2014), and earnings quality (Apergis et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

Corporate Social Responsibility Disclosure, Intellectual Capital Disclosure, Risk Disclosure, Cost of Capital: Moderating Role of Earnings Management

Fauzi,

Firmansyah

2023

aaj

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Purpose : This study investigates the effect of corporate social responsibility, intellectual capital disclosure, and risk disclosure on the cost of capital and the roles of earnings management in moderating these effects. Method : This study employs secondary data from annual reports and financial statements of 79 manufacturing companies listed on Indonesia Stock Exchange from 2016 to 2020. Using purposive sampling, the sample obtained in this study is 395 observations. The data were analyzed using multiple linear regression for panel data. Findings : This study finds that corporate social responsibility is negatively associated with cost of capital. Other than that, intellectual capital disclosure and risk disclosure are not associated with cost of capital. Moreover, earnings management failed to moderate the association between corporate social responsibility and the cost of capital. This study also found that earnings management strengthens the negative impact of intellectual capital disclosure on the cost of capital. In contrast, earnings management weakens the negative effect of risk disclosure on the cost of capital Novelty : This study places the moderating role of earnings management on testing the three non-financial disclosures on the cost of capital so that this study can complement the development of financial accounting research related to non-financial information. Keywords : Sustainability Disclosure; Intellectual Capital Disclosure; Risk Disclosure; Earnings Quality; Cost of Capital

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Effect of Earnings Management on Cost of Debt Before and After International Standard Financial Reporting Implementation

Situmeang¹,

Maksum²,

Erlina³

et al. 2018

Proceedings of the 1st Economics and Business International Conference 2017 (EBIC 2017)

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A business environment with high competition requires higher efficiency, not just operating efficiency but also the funding efficiency. One of the causes of funding inefficiency is the high cost of debt as a result of earnings management practices that can reduce investor confidence in the company's financial statements. The practice of earnings management has attracted practitioners, researchers, and regulators by develop various detecting models and develop standards such as International Financial Reporting Standard (IFRS). To analyze influence the effect of earnings management on cost of debt, this study uses three approaches: competing-component model, business model, and discretionary revenue model. The approach used is to review the capability of the linear regression model that is formed and to perform comparative analysis among the regression models formed by data from manufacturing companies listed in the Indonesia Stock Exchange for the years 2007-2011 as data before the IFRS implementation and 2012-2015 for data after the IFRS implementation. Based on the results of data processing obtained evidence that earnings management negatively affect the cost of debt using the three approaches but the model formed with business model approach has stronger than the regression equation formed with other models. When compared to the period before and after the implementation of IFRS, seen earnings management practices have decreased and the effect on the cost of debt becomes smaller.

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Is Earnings Management a Technique to Reduce Cost of Capital? Exploratory Study on Indian Companies

Cited by 3 publications

References 22 publications

Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

Corporate Social Responsibility Disclosure, Intellectual Capital Disclosure, Risk Disclosure, Cost of Capital: Moderating Role of Earnings Management

Effect of Earnings Management on Cost of Debt Before and After International Standard Financial Reporting Implementation

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