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.

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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

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article

How Is Short-Term Debt Exposure Associated with the Magnitude and Direction of Discretionary Accruals? Evidence from Korean Listed Firms

Heonsoo Kim, Byung‐Uk Chong
International Journal of Financial Studies
Auditing, Earnings Management, Governance
article

How Is Short-Term Debt Exposure Associated with the Magnitude and Direction of Discretionary Accruals? Evidence from Korean Listed Firms

Heonsoo Kim, Byung‐Uk Chong
article en

Abstract

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.

International Journal of Financial StudiesVol. 14(10)
University of Seoul (KR), Korea Institute of Finance (KR), College of Business Administration (LV)
University of Seoul
Openalex Percentile: Top 4%
Auditing, Earnings Management, Governance
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