Author(s): Hind Muhtaseb, Veronica Paz, Geoffrey Tickell, Mukesh Chaudhry
The optimal debt-equity combination continues to be a crucial topic that attracts academics and industry professionals. This research investigates how long-term and short-term debts affect earnings management in the context of Palestinian-listed companies. It also investigates whether audit firm size moderates these effects if any. Using financial information for 44 Palestinian-listed companies, for the years 2011-2020, the results indicate that companies with more short-term debt tend to be less successful in managing their earnings, while long-term debt has an insignificant impact on earnings management. The results also show that the size of the audit firm does not impact the link between the independent variables and the dependent variable. This research contributes significantly by bridging a gap that prior research has almost ignored. Additionally, the findings are of major concern to accounting and auditing professionals and can be considered for the future establishment of related rules and regulations which aim for sustaining and evolving the PEX sector.