Volume 20, No. 1, 2023
The Relationship Between Capital Structure And Earnings Management While Moderating Size In Egyptian Stock Market
Adel Mohamed Ahmed Naeem , Prof. Dr. Ahmed Sakr , Prof. Dr. Menan Etab
Abstract
This study investigates the relationship between capital structure and earnings management while using size as a moderator. Annual data for seventeen years (from 2004-2020) for ninety-seven companies listed in Egyptian stock market is obtained for the purpose of the study. Total debt, long term debt, and short-term debt are used as measure of capital structure while discretionary accruals were used to measure earnings management. Jones Model was used for calculation of discretionary accruals. Data were checked using correlation analysis, panel data analysis regression to test fixed and random effect and Hausman test was used to select best model. The results indicate a significant impact of capital structure on earning management. While there was positive relationship between size and earning management and negative relationship between size and capital structure. Thus, we concluded that firms with a debt-based capital structure have creditors that act as a watchdog over its earnings management practices; however, the results were statistically significant when controlling for firm size.
Pages: 19-31
Keywords: Earning management, capital structure, discretionary accruals, total debt, long term debt, short term debt and size.