EconPapers    
Economics at your fingertips  
 

Earnings Manipulation and the Cost of Capital: Empirical Investigation of Non-Financial Listed Firms of Pakistan

Muhammad Ilyas, Ihtesham Khan, Saima Urooge ()
Additional contact information
Muhammad Ilyas, Ihtesham Khan, Saima Urooge: AbdulWali Khan University Mardan

Journal of Management Sciences, 2019, vol. 6, issue 1, 96-104

Abstract: Management either for their informative or opportunistic purposes mask the true financial information of firms which is known as earnings manipulation practices. However, in turn such practices lead to a higher cost of capital. Therefore, in this study examined the effect of earnings manipulation on cost of capital in 144 listed sample firms of Pakistan Stock Exchange for the period of 2006-2016. Used panel data approaches for analysis and the diagnostic tests procedures of panel models selection suggests that fixed effect model is the suitable model. The result reports that firms that indulge in the activities of earnings manipulation their cost of capital are high because the manipulated information reduces the confidence of investors on fundamentals information of firms and ultimately they demand high rate of return. Moreover, control variables such as size, capital structure, firm performance, market risk and capital expenditure significantly affect the cost of capital and the results are consistent with the theoretical and empirical justifications. Hence, the study recommended for the policymakers to develop regulated policies to control the earnings manipulation.

Keywords: Earnings management; cost of capital; discretionary revenue model. (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://geistscience.com/JMS/Issue1-19/Article6/JMS-1906107.pdf (application/pdf)

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:gei:journl:v:6:y:2019:i:1:p:96-104

Access Statistics for this article

Journal of Management Sciences is currently edited by Imtiaz ARIF

More articles in Journal of Management Sciences from Geist Science, Iqra University, Faculty of Business Administration
Bibliographic data for series maintained by Imtiaz ARIF ().

 
Page updated 2019-08-03
Handle: RePEc:gei:journl:v:6:y:2019:i:1:p:96-104