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Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market

The article investigates whether Malaysian initial public offering (IPO) firms engage in real and accrual earnings management (AEM) and examines the impact of leverage on the earnings management’s discretionary behaviour of the firms for the period of 2003–2013. The Dechow, Sloan, and Sweeney (1995,...

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Main Authors: Kalgo, Sani Hussaini, Amin Noordin, Bany Ariffin, Nahar, Hairul Suhaimi
Format: Article
Language:English
Published: SAGE Publications 2019
Online Access:http://psasir.upm.edu.my/id/eprint/79435/1/Does%20leverage%20constrain%20real%20and%20AEM%20around%20IPO%20.pdf
http://psasir.upm.edu.my/id/eprint/79435/
https://journals.sagepub.com/doi/abs/10.1177/0972150918825196?journalCode=gbra
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spelling my.upm.eprints.794352021-04-07T01:10:04Z http://psasir.upm.edu.my/id/eprint/79435/ Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market Kalgo, Sani Hussaini Amin Noordin, Bany Ariffin Nahar, Hairul Suhaimi The article investigates whether Malaysian initial public offering (IPO) firms engage in real and accrual earnings management (AEM) and examines the impact of leverage on the earnings management’s discretionary behaviour of the firms for the period of 2003–2013. The Dechow, Sloan, and Sweeney (1995, The Accounting Review, 70[2], 193–225) cross-sectional modified Jones model was used to estimate discretionary accruals, while Roychowdhury’s (2006, Journal of Accounting and Economics, 42[3]), 335–370) cross-sectional models were used to investigate abnormal real activity discretionary behaviour. The results indicate Malaysian IPO firms engage in real and accrual discretionary behaviour. The graphical presentations of the earnings’ management proxies indicate higher real and AEM for high-leverage firms. Similarly, the multivariate analysis indicates a positive relationship between leverage and earnings management, which is in tandem with the agency cost of free cash flow theory and debt hypothesis. It is also consistent with the pecking-order theory of capital structure. This study suggests that regulatory agencies and standard setters should continue to improve quality of accounting reports in order to protect investors’ invested capital. SAGE Publications 2019 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/79435/1/Does%20leverage%20constrain%20real%20and%20AEM%20around%20IPO%20.pdf Kalgo, Sani Hussaini and Amin Noordin, Bany Ariffin and Nahar, Hairul Suhaimi (2019) Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market. Global Business Review, 20 (2). pp. 354-367. ISSN 0972-1509; ESSN: 0973-0664 https://journals.sagepub.com/doi/abs/10.1177/0972150918825196?journalCode=gbra 10.1177/0972150918825196
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description The article investigates whether Malaysian initial public offering (IPO) firms engage in real and accrual earnings management (AEM) and examines the impact of leverage on the earnings management’s discretionary behaviour of the firms for the period of 2003–2013. The Dechow, Sloan, and Sweeney (1995, The Accounting Review, 70[2], 193–225) cross-sectional modified Jones model was used to estimate discretionary accruals, while Roychowdhury’s (2006, Journal of Accounting and Economics, 42[3]), 335–370) cross-sectional models were used to investigate abnormal real activity discretionary behaviour. The results indicate Malaysian IPO firms engage in real and accrual discretionary behaviour. The graphical presentations of the earnings’ management proxies indicate higher real and AEM for high-leverage firms. Similarly, the multivariate analysis indicates a positive relationship between leverage and earnings management, which is in tandem with the agency cost of free cash flow theory and debt hypothesis. It is also consistent with the pecking-order theory of capital structure. This study suggests that regulatory agencies and standard setters should continue to improve quality of accounting reports in order to protect investors’ invested capital.
format Article
author Kalgo, Sani Hussaini
Amin Noordin, Bany Ariffin
Nahar, Hairul Suhaimi
spellingShingle Kalgo, Sani Hussaini
Amin Noordin, Bany Ariffin
Nahar, Hairul Suhaimi
Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market
author_facet Kalgo, Sani Hussaini
Amin Noordin, Bany Ariffin
Nahar, Hairul Suhaimi
author_sort Kalgo, Sani Hussaini
title Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market
title_short Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market
title_full Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market
title_fullStr Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market
title_full_unstemmed Does leverage constrain real and AEM around IPO corporate event? evidence from the emerging market
title_sort does leverage constrain real and aem around ipo corporate event? evidence from the emerging market
publisher SAGE Publications
publishDate 2019
url http://psasir.upm.edu.my/id/eprint/79435/1/Does%20leverage%20constrain%20real%20and%20AEM%20around%20IPO%20.pdf
http://psasir.upm.edu.my/id/eprint/79435/
https://journals.sagepub.com/doi/abs/10.1177/0972150918825196?journalCode=gbra
_version_ 1696977672293318656
score 13.211869

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