%0 Journal Article
%T Does Leverage Constrain Real and AEM Around IPO Corporate Event? Evidence from the Emerging Market
%A Bany-Ariffin A.N.
%A Bolaji Tunde Matemilola
%A Hairul Suhaimi Bin Nahar
%A Sani Hussaini Kalgo
%J Global Business Review
%@ 0973-0664
%D 2019
%R 10.1177/0972150918825196
%X The article investigates whether Malaysian initial public offering (IPO) firms engage in real and accrual earnings management (AEM) and examines the impact of leverage on the earnings management¡¯s discretionary behaviour of the firms for the period of 2003¨C2013. The Dechow, Sloan, and Sweeney (1995, The Accounting Review, 70[2], 193¨C225) cross-sectional modified Jones model was used to estimate discretionary accruals, while Roychowdhury¡¯s (2006, Journal of Accounting and Economics, 42[3]), 335¨C370) cross-sectional models were used to investigate abnormal real activity discretionary behaviour. The results indicate Malaysian IPO firms engage in real and accrual discretionary behaviour. The graphical presentations of the earnings¡¯ management proxies indicate higher real and AEM for high-leverage firms. Similarly, the multivariate analysis indicates a positive relationship between leverage and earnings management, which is in tandem with the agency cost of free cash flow theory and debt hypothesis. It is also consistent with the pecking-order theory of capital structure. This study suggests that regulatory agencies and standard setters should continue to improve quality of accounting reports in order to protect investors¡¯ invested capital
%K Real earnings management
%K accrual earnings management
%K IPO
%K capital structure
%K emerging market
%U https://journals.sagepub.com/doi/full/10.1177/0972150918825196