Earnings Management of Financial Distressed Firms during Debt Restructuring Negotiation

Journal
University of the Thai Chamber of Commerce Journal
Publisher(s)
Chulalongkorn University Printing House
University of the Thai Chamber of Commerce
Date Issued
2009
Author(s)
Other Contributor(s)
University of the Thai Chamber of Commerce. Journal Editorial Office
Abstract
This study examines discretionary accruals in financial distressed firms that haveundertaken debt restructuring negotiation of 38 troubled listed firms on the StockExchange of Thailand during the recent financial crisis in Thailand (1998-1999). Twoestablished models: Jones (1991) and Modified Jones (Dechow, Sloan, and Sweeney,1995) are used for detecting discretionary accruals. The results provided in this papersuggest that the managers of financial distressed firms have incentives to adoptincome-decreasing accruals during the year surrounding negotiations with lenders fordebt restructuring. We find evidence that the magnitude of discretionary accruals isstatistically significantly negative in the year of negotiation. However, these accruals arenot significantly different from those of control firms which have not undertaken debtrestructuring negotiation during the same period but experienced similar financialperformance. The findings suggest that distressed firms whether undertaken debtrestructuring negotiation adopt income-decreasing accrual during the crisis period(1998-1999).
Subject(s)
ISSN
0125-2437
Access Rights
public
Rights
This work is protected by copyright. Reproduction or distribution of the work in any format is prohibited without written permission of the copyright owner.
Rights Holder(s)
University of the Thai Chamber of Commerce
Bibliographic Citation
Parichart Maneemai, Sansanee Sriworadetpisan (2009) Earnings Management of Financial Distressed Firms during Debt Restructuring Negotiation. University of the Thai Chamber of Commerce Journal Vol.29 No.4.
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