Real Earnings Management Uncertainty and Corporate Credit Risk

Tsung Kang Chen, Yijie Tseng, Yu-Ting Hsieh

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Abstract: This study examines the accounting information uncertainty effects on corporate credit risk from the perspective of real earnings management (RM) activities by investigating 9565 American bond observations from year 2001 to 2008. The main results show that the volatilities of RM activities significantly and positively affect corporate bond yield spreads when well-known bond spread determinant variables are controlled. In addition, the results are robust to alternative model specifications, including the suspect firm analyses, another less ambiguous measure of abnormal cash flows from operations, and abnormal production cost analyses in manufacturing industry or with control of the input price variation. This research also finds that the positive effects of RM volatilities become weaker if a firm has a lower credit rating. Finally, our results remain hold with considering endogeneity issues and analyst characteristic variables and for another estimation period of RM volatilities.

Original languageEnglish
Pages (from-to)413-440
Number of pages28
JournalEuropean Accounting Review
Volume24
Issue number3
DOIs
Publication statusPublished - 2015 Jul 3

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Credit risk
Uncertainty
Earnings management
Management activities
Manufacturing industries
Bond spreads
Production cost
Cash flow
Input prices
Endogeneity
Corporate bonds
Alternative models
Model specification
Accounting information
Analysts
Information uncertainty
Yield spread
Bond yields
Credit rating

All Science Journal Classification (ASJC) codes

  • Accounting

Cite this

Chen, Tsung Kang ; Tseng, Yijie ; Hsieh, Yu-Ting. / Real Earnings Management Uncertainty and Corporate Credit Risk. In: European Accounting Review. 2015 ; Vol. 24, No. 3. pp. 413-440.
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Real Earnings Management Uncertainty and Corporate Credit Risk. / Chen, Tsung Kang; Tseng, Yijie; Hsieh, Yu-Ting.

In: European Accounting Review, Vol. 24, No. 3, 03.07.2015, p. 413-440.

Research output: Contribution to journalArticle

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