Earnings Quality, Leverage Deficit (Surplus), and Financing Policy in companies listed in Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

Naghi  Fazeli ¹ (Assistant Professor, Department Of Accounting, Semnan Branch, Semnan, iran. (corresponding author))
Abuozar  Jafari Tajangooke ² (Master of Accounting, Semnan Branch, Islamic Azad University, Semnan, iran.)

Received: 2018-02-05 Accepted : 2008-04-16 Published : 2019-12-22

Keywords: Leverage deficit, Earnings Quality, Debt financing, Equity Financing, Accrual and Real Earnings Mana,

Abstract :

The paper examines the relationship between earnings quality and leverage deficit, as well as the impact of earnings quality on equity financing choice for under- and over-leveraged firms. Considering external financing and its components, equity and debt, and both accrual-based and real earnings management, we further examine the effect of earnings quality and leverage deficit on financing choice and activities. In this regard, a sample of 125 companies listed in the Tehran Stock Exchange during the years 1390 to 1395 (750 views) was selected and tested by using the linear regression and logistic regression model. The results show that there is no correlation between financial leverage deficit and poor earnings quality. Also, for under- and over- financial leveraged firms, there is also no relationship between the quality of profit and financing through the issuance of stocks. Other findings of the study showed that companies with a over-financial leverage compared with companies with a financial leverage deficit, before financing by issuing stocks, manage their earnings through accruals and real items to make them more convenient to sell their stocks. On the other hand, in over-financial leveraged firms, there was no correlation between debt financing and earnings management through accruals and real items. compared to under-financial leveraged firms.

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