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September 10, 2025International Journal of Business and SocietyOpen Access

Do Political Connections Mitigate the Detrimental Effect of Earnings Management? Evidence From Cost of Debt

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Authors

MPMuhammad Agung PrabowoSSSutaryo SutaryoAWAnis Widjajanto

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Overview

Analysis shows political connections lessen the negative impact of earnings management on cost of debt, suggesting important financial implications.

Key Points

  • Political connections mitigate the adverse effects of earnings management on the cost of debt.
  • Earnings management correlated positively with cost of debt, showing a significant impact of US$0.766 million in interest.
  • Sample analysis of non-financial firms listed from 2010 to 2020 highlights the importance of political ties.
  • These findings imply that firms with strong political connections face fewer scrutiny from debtholders regarding earnings management.

Cite This Study

Prabowo et al. (2025) studied this question.

synapsesocial.com/papers/68c1955c9b7b07f3a0619320https://doi.org/10.33736/ijbs.9644.2025
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