2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan
| Format: | General Document |
|---|
| _version_ | 1860798360544346112 |
|---|---|
| building | INTELEK Repository |
| collection | Online Access |
| collectionurl | https://intelek.unisza.edu.my/intelek/pages/search.php?search=!collection8791 |
| copyright | Copyright©PWB2026 |
| country | Malaysia |
| date | 2025-08-07 |
| format | General Document |
| id | 17459 |
| institution | UniSZA |
| originalfilename | 17459_456ea3682a2426b.pdf |
| person | Bilal Ahmed |
| recordtype | oai_dc |
| resourceurl | https://intelek.unisza.edu.my/intelek/pages/view.php?ref=17459 |
| sourcemedia | Server storage Scanned document |
| spelling | 17459 https://intelek.unisza.edu.my/intelek/pages/view.php?ref=17459 https://intelek.unisza.edu.my/intelek/pages/search.php?search=!collection8791 General Document Malaysia Library Staff (Top Management) Library Staff (Management) Library Staff (Support) Terengganu Faculty of Business and Management English application/pdf 1.7 Public Access Server storage Scanned document Universiti Sultan Zainal Abidin Universiti Sultan Zainal Abidin 303 Earnings Management Pakistan Dissertations, Academic 2025-08-07 Microsoft® Word LTSC Copyright©PWB2026 Thesis Agency Theory Bilal Ahmed Business Risk Leverage Non-financial Firms Positive Accounting Theory Generalized Method of Moments (GMM) Accrual-based Earnings Management Real-based Earnings Management Earnings management -- Pakistan Corporations -- Pakistan -- Finance Risk management -- Pakistan Financial statements -- Pakistan Accounting -- Standards -- Pakistan 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan Earnings management has become a persistent challenge for firms worldwide over the past few decades. This issue warrants attention due to the complex business environment and inadequate regulatory framework implementations. The study aims to identify the role of business risk in defining the relationship between leverage and earnings management practices of Pakistani firms. Business risk includes earnings volatility and cash flow volatility of firms, while leverage is the book leverage and market leverage of firms. Earnings management practices comprise accrual-based earnings management, real-based earnings management, and classification shifting-based earnings management. This study investigates the impact of leverage on earnings management, with business risk serving as a potential moderator. A sample of all non-financial Pakistani firms from years 2004 to 2018 was examined to achieve the research objectives. The target population comprised firms engaged in earnings management practices. The hypothetical and empirical model for leverage and earnings management in the presence of business risk has been elaborated through agency theory and positive accounting theory. The two-step system Generalized Method of Moments dynamic panel estimators was applied due to the endogeneity problem between variables. The findings indicate that leverage plays a crucial role in shaping earnings management practices. Specifically, firms with high leverage actively employ earnings management practices. Under specific circumstances, leverage alters market dynamics, resulting in adverse effects on market conditions and posing challenges for firms’ financial decision-making. Firm managers manipulate their earnings in financial statements, strategically portraying a positive image to stakeholders. Furthermore, firms experiencing high earnings volatility and cash flow volatility actively engage in earnings management practices. Elevated business risk may prompt managers to resort to earnings management. In summary, business risk acts as a moderating factor in the relationship between leverage and earnings management within firms. As a moderator, business risk reinforces the association between leverage and involvement in earnings management. These findings hold consistently across both highly profitable and low-profitable firms, providing robust and conclusive evidence. This study makes a valuable contribution by pinpointing the role of business risk in shaping the relationship between leverage and earnings management practices among Pakistani firms. The study contributes as dynamic framework focused in the study. Furthermore, this insight equips managers should carefully consider the interplay between business risk, leverage levels, and the potential for earnings manipulation, while policymakers can implement regulations to enhance transparency and discourage opportunistic earnings management practices. The study also proposes that higher business risk strengthens the incentive for managers to engage in earnings management when faced with increased leverage, thereby extending existing agency theory within a risk-contingent framework. Moreover, the study argues that business risk acts as a critical contextual factor, altering the cost-benefit analysis of earnings manipulation for highly leveraged firms. These strategic financial decisions significantly impact the firm’s financial success and mold the opportunistic behaviour of managers. As a result, this study assists stakeholders including firm managers, policymakers, financial regulatory bodies, and government institutions, in formulating policies and scrutinizing financial statements in light of these phenomena. Nevertheless, the multifaceted nature of this relationship remains dynamic, and scholars and practitioners have yet to arrive at a definitive consensus regarding its intricacies. The nexus between leverage and earnings management defies simple cause-and-effect dynamics; it is further nuanced by the influence of business risk, which amplifies the complexity of this relationship. Moreover, firm managers may employ diverse techniques for earnings management, thereby heightening the intricacy of the aforementioned relationship. uuid:52711004-E433-40F5-BBF9-87DA19E1A377 17459_456ea3682a2426b.pdf |
| spellingShingle | 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan |
| state | Terengganu |
| subject | Dissertations, Academic Earnings management -- Pakistan Corporations -- Pakistan -- Finance Risk management -- Pakistan Financial statements -- Pakistan Accounting -- Standards -- Pakistan |
| summary | Earnings management has become a persistent challenge for firms worldwide over the past few decades. This issue warrants attention due to the complex business environment and inadequate regulatory framework implementations. The study aims to identify the role of business risk in defining the relationship between leverage and earnings management practices of Pakistani firms. Business risk includes earnings volatility and cash flow volatility of firms, while leverage is the book leverage and market leverage of firms. Earnings management practices comprise accrual-based earnings management, real-based earnings management, and classification shifting-based earnings management. This study investigates the impact of leverage on earnings management, with business risk serving as a potential moderator. A sample of all non-financial Pakistani firms from years 2004 to 2018 was examined to achieve the research objectives. The target population comprised firms engaged in earnings management practices. The hypothetical and empirical model for leverage and earnings management in the presence of business risk has been elaborated through agency theory and positive accounting theory. The two-step system Generalized Method of Moments dynamic panel estimators was applied due to the endogeneity problem between variables. The findings indicate that leverage plays a crucial role in shaping earnings management practices. Specifically, firms with high leverage actively employ earnings management practices. Under specific circumstances, leverage alters market dynamics, resulting in adverse effects on market conditions and posing challenges for firms’ financial decision-making. Firm managers manipulate their earnings in financial statements, strategically portraying a positive image to stakeholders. Furthermore, firms experiencing high earnings volatility and cash flow volatility actively engage in earnings management practices. Elevated business risk may prompt managers to resort to earnings management. In summary, business risk acts as a moderating factor in the relationship between leverage and earnings management within firms. As a moderator, business risk reinforces the association between leverage and involvement in earnings management. These findings hold consistently across both highly profitable and low-profitable firms, providing robust and conclusive evidence. This study makes a valuable contribution by pinpointing the role of business risk in shaping the relationship between leverage and earnings management practices among Pakistani firms. The study contributes as dynamic framework focused in the study. Furthermore, this insight equips managers should carefully consider the interplay between business risk, leverage levels, and the potential for earnings manipulation, while policymakers can implement regulations to enhance transparency and discourage opportunistic earnings management practices. The study also proposes that higher business risk strengthens the incentive for managers to engage in earnings management when faced with increased leverage, thereby extending existing agency theory within a risk-contingent framework. Moreover, the study argues that business risk acts as a critical contextual factor, altering the cost-benefit analysis of earnings manipulation for highly leveraged firms. These strategic financial decisions significantly impact the firm’s financial success and mold the opportunistic behaviour of managers. As a result, this study assists stakeholders including firm managers, policymakers, financial regulatory bodies, and government institutions, in formulating policies and scrutinizing financial statements in light of these phenomena. Nevertheless, the multifaceted nature of this relationship remains dynamic, and scholars and practitioners have yet to arrive at a definitive consensus regarding its intricacies. The nexus between leverage and earnings management defies simple cause-and-effect dynamics; it is further nuanced by the influence of business risk, which amplifies the complexity of this relationship. Moreover, firm managers may employ diverse techniques for earnings management, thereby heightening the intricacy of the aforementioned relationship. |
| title | 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan |
| title_full | 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan |
| title_fullStr | 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan |
| title_full_unstemmed | 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan |
| title_short | 2025_The Moderating Effect of Business Risk on The Relationship Between Leverage and Earnings Management Among Listed Firms In Pakistan |
| title_sort | 2025_the moderating effect of business risk on the relationship between leverage and earnings management among listed firms in pakistan |