Earnings Management versus Capital Structure: What Are the Chances of Companies Occurring Within the Discretionary Limit?

  • Samuel Lyncon Leandro de Lima Universidade Estadual do Oeste do Paraná - UNIOESTE http://orcid.org/0000-0003-3956-3575
  • Adhmir Renan Voltolini Gomes Universidade Estadual do Oeste do Paraná - UNIOESTE
  • Roberto Francisco de Souza Faculdade Maurício de Nassau - FMN/Salvador.
  • Delci Grapégia Dal Vesco Universidade Estadual do Oeste do Paraná - UNIOESTE

Abstract

The discussions about companies' debts have been pertinent to researches for decades, but it is still a puzzle issue. The mainly aspect this issue is how managers chooses funding sources. In this sense, the purpose of this study is analyzing the chances of occurring companies within the discretionary limit in relation to their capital structure. This research was conducts by logistic regressions with a sample of 706 energy sector firms from 37 countries around the world, with financial data from the period 2015 to 2017, making the total of 2.118 observations. So, results shows that profitability, investment opportunities, firm size, low capital structure are variables that affect to the chances of companies occurring within the discretionary limit. These results evidenced that the discretionary limit can be greater than 1% of the return on asset (ROA). Based on this findings we suggest that for some sectors, the discretionary limit may be different from the energy sector. Besides this, it depends by the attention of the regulatory agents of each country, as well as the relevance of the companies sector to the others.

Published
Dec 17, 2019
How to Cite
LIMA, Samuel Lyncon Leandro de et al. Earnings Management versus Capital Structure: What Are the Chances of Companies Occurring Within the Discretionary Limit?. Revista de Negócios, [S.l.], v. 24, n. 4, p. 55-63, dec. 2019. ISSN 1980-4431. Available at: <https://proxy.furb.br/ojs/index.php/rn/article/view/8335>. Date accessed: 18 oct. 2021. doi: http://dx.doi.org/10.7867/1980-4431.2019v24n4p55-63.
Section
Articles

Keywords

Earnings management; capital structure; trade off theory; pecking order theory; energy sector