Does Discretionary Accruals Affect the Financing Behaviour of Firms? Evidence from Pakistan (A case of selected non-financial listed firms)
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Date
2017
Authors
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Journal ISSN
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Publisher
University of Management & Technology
Abstract
Purpose- In order to run organizations effectively and efficiently capital structure is
consider as essential element. Researchers often try to explain the determinants of capital
structure. After the mega corporate scandals like Enron, WorldCom, financial reporting
disclosures has become one of the most discussed topics. The prime objective of this
research is to explore the relationship between discretionary accruals and financing
behaviour of a firm.
Design/Methodology/Approach- Secondary research is done in this study in order to
find out the relationship between discretionary accruals and financing behavior of a firm.
This study covers a period from 2010 to 2015, further the proxy will used to measure
financing behavior is gearing ratio and discretionary accruals will be calculated by
modified Jones model. In order to find out this relationship fixed effect regression model
is applied.
Findings Result explains that discretionary accruals have a significant and positive
relationship with gearing ratio. This reflects that those firms that manage their earnings
have a higher leverage. Whereas on other hand Return on Assets (ROA) and size of a
firm have a negative and significant relationship with gearing ratio. Furthermore
tangibility has a positive and significant relationship with gearing ratio and Return on
equity (ROE) has negative relationship but this relationship is insignificant.
Originality / Value-This paper is useful organizations, companies as well as for Institute
of Charted Accountants of Pakistan. This paper is equally useful for academic institutions
as well as for future researchers.
Description
Muhammad Gulzar
Keywords
Discretionary accruals, financing behavior, gearing ratio, MS