How Is Short-Term Debt Exposure Associated with the Magnitude and Direction of Discretionary Accruals? Evidence from Korean Listed Firms
Aggregate leverage captures how much debt a firm carries but not how much is concentrated in the short term. This study examines whether short-term debt exposure, measured primarily as lagged short-term financial liabilities scaled by total assets, is associated with accrual-based reporting after controlling for aggregate leverage. The baseline fixed-effects analysis uses 22,498 firm-year observations from Korean listed firms over 2011–2023. The primary outcome is absolute Modified Jones discretionary accruals. Greater short-term debt exposure is associated with larger accrual magnitude: a 10-percentage-point increase corresponds to about 0.0047, or 6.2% of the sample mean. A joint maturity specification shows a positive association for short-term debt, whereas the coefficient on long-term debt is not statistically significant. Directional tests do not support uniform income-increasing reporting. First-difference estimates yield similar within-firm evidence. Supplementary analyses show a stronger association under high financial leverage, while the low-interest-coverage interaction is positive and statistically significant only at the 10% level. These patterns do not identify mechanisms. The findings indicate that debt-maturity composition is informative about accrual-based reporting beyond what aggregate leverage reveals, and that separating accrual magnitude from direction helps clarify the interpretation of this association.
Authors
- Heonsoo Kim (ORCID: https://orcid.org/0009-0006-0969-0900)
- Byung‐Uk Chong (ORCID: https://orcid.org/0000-0003-3197-6180)
Institutions
- University of Seoul (KR)
- Korea Institute of Finance (KR)
- College of Business Administration (LV)
Publication Details
- Journal
- International Journal of Financial Studies
- Published
- 2026-10-16
- DOI
- https://doi.org/10.3390/ijfs14100277
- Primary Topic
- Auditing, Earnings Management, Governance
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- University of Seoul