The impact of short-term debt on accruals-based earnings management – evidence from Vietnam

• Main Authors: Trinh Quoc Trung, Nguyen Thanh Liem, Cao Thi Mien Thuy
• Format: Article
• Language: English
• Published: Taylor & Francis Group 2020-01-01
• Series: Cogent Economics & Finance
• Subjects: short-debt maturity; earnings management; growth opportunities; non-linear impact
• Online Access: http://dx.doi.org/10.1080/23322039.2020.1767851

This study seeks to examine the relationship between short-term debt maturity and accruals-based earnings management using a sample of listed firms in Vietnam from 2010–2017. The extant literature remains under-explored on the impact of short-term debt on accruals-based earnings management at low and high levels of short-term debt. We further dissect the impact of the interaction between the growth opportunities and short debt maturity on accruals-based earnings management. Our findings provide evidence suggesting that short-term debt maturity is likely to exert a desirable impact in lowering earnings management at low levels of short-term debt, while at high levels it tends to increase earnings manipulation, demonstrating a U-shaped relationship. Furthermore, we show that growth opportunities moderate the impact of short debt maturity on earnings management. Specifically, the U-shaped pattern between short-term debt and earnings management is pronounced for firms with low growth opportunities, while for high-growth counterparts that pattern weakens.