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Growing Science » Accounting » Pecking order, earnings management and capital structure

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Accounting

ISSN 2369-7407 (Online) - ISSN 2369-7393 (Print)
Quarterly Publication
Volume 7 Issue 6 pp. 1389-1394 , 2021

Pecking order, earnings management and capital structure Pages 1389-1394 Right click to download the paper Download PDF

Authors: Novi Swandari Budiarso, Winston Pontoh

DOI: 10.5267/j.ac.2021.3.026

Keywords: Capital structure, Agency problem, Earnings management

Abstract: Most of studies imply that firms decrease or increase their debt capacity in context of pecking order theory or agency problems. On this point, the setting of this study is based on two main problems related to capital structure: the first is determining the source of funds for financing investments, and the second is solving the conflict between shareholders and managers, or the agency problem. The objective of this study is to provide evidence about how firms establish their capital structure in relation to pecking order theory and the agency problem by controlling earnings management in the context of Indonesian firms. This study conducts logistic regression on 28 firms in the consumer goods industry listed on the Indonesia Stock Exchange from 2010 to 2017.This study finds that pecking order theory determines the capital structure of most Indonesian firms with high debt. The results imply that agency problems are unable to explain corporate capital structure and earnings management is not effective for motivating Indonesian firms to establish corporate governance.

How to cite this paper
Budiarso, N & Pontoh, W. (2021). Pecking order, earnings management and capital structure.Accounting, 7(6), 1389-1394.

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Journal: Accounting | Year: 2021 | Volume: 7 | Issue: 6 | Views: 1813 | Reviews: 0

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