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http://dx.doi.org/10.5394/KINPR.2017.41.4.235

Study on the Relationship between Capital Structure and Earning Management in the Korean Shipping Companies  

Lee, Sung-Yhun (School of Port and Logistics, Kaya University)
Ahn, Ki-Myung (Division of Shipping Management, Korea Maritime and Ocean University)
Publication Information
Journal of Navigation and Port Research / v.41, no.4, 2017 , pp. 235-242 More about this Journal
Abstract
Earnings management is defined as an intentional act during the financial reporting process or a manager's choice of accounting policies to avoid earnings decreases or obtain some private gains. Shipping firms have a highly debt-intensive capital structure and a significant motivation in earnings management to avoid failure of a Debt Covenant. From this point of views, this paper tries to determine the relationship between the capital structure and discretionary accruals estimated using the re-modified Jones model (1995). The sample used to test the research models is made up of 87 Korean shipping firms during the period from 2007 to 2015. A histogram analysis, t-test and FGLS confirm the possibility of using earnings management, and it proved that Korean shipping firms manage their earnings to avoid financial loss. An analysis of the relationship between the capital structure and earning managements, shows it is difficult to support the Debt Covenant, shown as a negative relationship between the debt ratio and debt maturity as shipping firms' capital structure and discretionary accruals as earning management variable. An additional analysis presents a negative relationship between previous debt maturity and discretionary accruals, and the possibility of earning management in a highly increased debt ration group.
Keywords
Capital Structure; Earning Management; Discretionary Accruals; Shipping Industry; Debt Ratio; Debt Maturity;
Citations & Related Records
Times Cited By KSCI : 2  (Citation Analysis)
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