Document Type : Research Paper
Abstract
Purpose: The primary objective is to explore the influence of earnings management on the relationship between managerial ability and debt choice in Iran's capital market.
Method: To achieve the research objectives, financial data from 128 companies listed on the Tehran Stock Exchange over a 12-year period (2011–2022, covering 1,536 firm-years) were utilized. The study's hypotheses were tested using multivariate regression methods.
Findings: The statistical analysis revealed a significant negative relationship between managerial ability and debt choice. Additionally, real earnings management was found to intensify this relationship. Sensitivity analyses confirmed the robustness of the initial results, demonstrating that the negative and significant relationship persists even when alternative methods are employed to measure bank debt.
Conclusion: The findings indicate that managerial ability negatively affects a firm's reliance on bank financing and loans. Furthermore, earnings management amplifies this relationship. In firms with higher levels of earnings management, lower managerial ability leads to greater dependence on bank loans.
Contribution: The findings of this research can contribute to optimizing corporate financing and reducing unnecessary financial costs by employing competent managers, thereby alleviating pressures on the banking system to control liquidity in the economy.
Main Subjects
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