Impact of litigation risk on the cost of corporate debt financing: The moderating role of earnings management strategies

Xuemei Cheng, Yinglong Zheng, Siyuan Bi and Fangxin Chen

Finance Research Letters, 2025, vol. 80, issue C

Abstract: Using a sample of non-financial listed companies from 2009 to 2022, this study examines the relationships among litigation risk, earnings management strategies, and corporate debt financing costs. Findings show that litigation risk increases corporate debt financing costs, with earnings management significantly moderating this relationship. The moderating effect of earnings management on this relationship exhibits heterogeneity across different corporate characteristics.

Keywords: Litigation risk; Corporate debt financing costs; Earnings management strategies; Financial regulation; Audit opinions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006324

DOI: 10.1016/j.frl.2025.107372

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