Refinancing risk, earnings management, and stock return

Shu-Feng Wang, Yura Kim, Seonmi Kim and Song, Kyojik “Roy”

Research in International Business and Finance, 2024, vol. 70, issue PB

Abstract: This paper presents empirical evidence that a firm’s refinancing risk affects its income-increasing earnings management. We find that refinancing risk is positively associated with discretionary accruals and that interaction between leverage and refinancing risk aggravates the incentive to manage earnings. We also find that the firm’s cash holdings attenuate the adverse effect of the refinancing risk on the earnings management. In addition, we document that the discretionary accruals of firms with high refinancing risk are negatively associated with one-year-ahead stock returns. Our results suggest that firms with higher refinancing risk have opportunistic incentives to inflate earnings to appear financially healthy, but the effect of earnings management is temporary.

Keywords: Refinancing risk; Cash holdings; Discretionary accruals; Earnings management; Stock return (search for similar items in EconPapers)
JEL-codes: G32 M41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531924001867
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pb:s0275531924001867

DOI: 10.1016/j.ribaf.2024.102393

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().