Does Debt Influence Earnings Management in Going Private Transactions in Brazil?

Authors

  • Cecilia Ferreira Chaves Universidade Federal de Minas Gerais
  • Wesley Cirino dos Santos Universidade Federal de Minas Gerais
  • Wagner Moura Lamounier Universidade Federal de Minas Gerais

DOI:

https://doi.org/10.4013/base.2023.203.05

Keywords:

Earnings Management, Going Private Transactions, Debt

Abstract

This paper aimed to analyze the influence of debt in earnings management of non-financial companies that were listed on the Brazilian capital market and went private by stock repurchase between 2002 and 2020. The companies that went private were matched by size and sector of activity with those that remained on the stock exchange market in the year prior to the offer announcement. Earnings management was estimated using discretionary accruals and debt was measured by Debt-to-Equity ratio and Total Debt ratio. The results suggest that companies that went public by repurchasing shares tend present negative earnings management. Also, it was found negative and significant relationship between earnings management and Debt-to-Equity ratio and company size. It is understood that the intensification of the monitoring of the managers' actions, mainly due to the publicity of the process implies the restriction of discretionary practices.

Author Biographies

Cecilia Ferreira Chaves, Universidade Federal de Minas Gerais

Mestranda do Programa de Pós-Graduação e Pesquisas em Controladoria e Contabilidade da Faculdade de Ciências Econômicas da Universidade Federal de Minas Gerais

Wesley Cirino dos Santos, Universidade Federal de Minas Gerais

Mestrando do Programa de Pós-Graduação e Pesquisas em Controladoria e Contabilidade da Faculdade de Ciências Econômicas da Universidade Federal de Minas Gerais

Wagner Moura Lamounier, Universidade Federal de Minas Gerais

Professor Doutor do Programa de Pós-Graduação e Pesquisas em Controladoria e Contabilidade da Faculdade de Ciências Econômicas da Universidade Federal de Minas Gerais

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Published

2023-12-10

Issue

Vol. 20 No. 3 (2023): JUL/SET

Section

Articles

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