The Effect of Litigation Risk on Earnings Management in the Proximity to Debt Covenant Violation
The Effect of Litigation Risk on Earnings Management in the Proximity to Debt Covenant Violation
bakalářská práce (OBHÁJENO)
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Trvalý odkaz
http://hdl.handle.net/20.500.11956/102406Identifikátory
SIS: 195594
Kolekce
- Kvalifikační práce [17112]
Autor
Vedoucí práce
Oponent práce
Červinka, Michal
Fakulta / součást
Fakulta sociálních věd
Obor
Ekonomie a finance
Katedra / ústav / klinika
Institut ekonomických studií
Datum obhajoby
10. 9. 2018
Nakladatel
Univerzita Karlova, Fakulta sociálních vědJazyk
Angličtina
Známka
Velmi dobře
Klíčová slova (anglicky)
Litigation risk, Real earnings management, Accounting earnings management, Debt covenant violation, Technical defaultThis bachelor thesis aims to establish a relationship between earnings management in proximity to debt covenant violation and the presence of litigation risk. Central testable concept is Watts and Zimmerman (1990) debt covenant hypothesis according to which managers tend to manipulate earnings to reduce the possibility of violation of their company's debt agreement. This setting allows investigating whether the risk of litigation is an effective regulatory mechanism which improves the contracting usefulness of accounting numbers and better align the interests between creditors and company managers, thus making debt covenants more reliable as monitoring mechanisms. Due to inconclusive results, this thesis was unable to establish whether the threat of litigation can discipline managerial reporting practices and deter misreporting for the companies with substantial debt covenant incentives.