Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1017572 | Journal of Business Research | 2014 | 7 Pages |
Abstract
We examine the association between real earnings management and the cost of new bond issues of U.S. corporations. We consider three types of real earnings management: sales manipulation, overproduction, and the abnormal reduction of discretionary expenditures. We find that overproduction impairs credit ratings and that sales manipulation and overproduction are associated with higher bond yield spreads. Overall, our results imply that credit rating agencies and bondholders perceive real earnings management as a credit risk-increasing factor and thus require high risk premiums.
Keywords
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Wenxia Ge, Jeong-Bon Kim,