The impact of short-term debt on accruals-based earnings management – evidence from Vietnam

Trinh Quoc Trung, Nguyen Thanh Liem, Cao Thi Mien Thuy and Mohammed Elgammal

Cogent Economics & Finance, 2020, vol. 8, issue 1, 1767851

Abstract: This study seeks to examine the relationship between short-term debt maturity and accruals-based earnings management using a sample of listed firms in Vietnam from 2010–2017. The extant literature remains under-explored on the impact of short-term debt on accruals-based earnings management at low and high levels of short-term debt. We further dissect the impact of the interaction between the growth opportunities and short debt maturity on accruals-based earnings management. Our findings provide evidence suggesting that short-term debt maturity is likely to exert a desirable impact in lowering earnings management at low levels of short-term debt, while at high levels it tends to increase earnings manipulation, demonstrating a U-shaped relationship. Furthermore, we show that growth opportunities moderate the impact of short debt maturity on earnings management. Specifically, the U-shaped pattern between short-term debt and earnings management is pronounced for firms with low growth opportunities, while for high-growth counterparts that pattern weakens.

Date: 2020
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DOI: 10.1080/23322039.2020.1767851

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