Determinants of the capital structure and accrual-based earnings management

Abstract

Purpose: The main purpose of the paper is to examine the relationship between the value of discretionary accruals and the legal and economic determinants of capital structure, which are taken into account in static trade-off theory and pecking order theory. Methodology/approach: Discretionary accruals were extracted using the Jones model and the Kang-Sivaramakrishnana model. The empirical research is based on regression analyses, variable distribution statistics, and Spearman's rank correlation coefficient analyses, among others. The study covered 72 public industrial enterprises listed on the Warsaw Stock Ex-change. Findings: In the studied sample, there are statistically significant relationships be-tween discretionary accruals and variables such as effective tax rate, non-debt tax shield, operating risk, enterprise size, and the operating profitability of assets. Research limitations/implications: Due to the limited sample, the research results cannot be generalized to all industrial enterprises. Moreover, the indicators of good-ness-of-fit of the regression models to the empirical data are low, which indicates the need to further explore this field of research. Originality/value: The presented research methodology is innovative in relation to the Polish capital market. Previous empirical research on this issue is limited to showing the relationship between financial leverage and discretionary accruals.