Abbas Aflatooni - Department of Accounting, Bu-Ali Sina University, Hamedan, Iran
Mahdi Khazaei - Department of Accounting, Bu-Ali Sina University, Hamadan, Iran
Zahra Nikbakht - Department of Management, Economics and Accounting, Payam Noor University (PNU), P.OBox, ۱۹۳۹۵-۴۶۹۷ Tehran, Iran

This study examines whether the firms’ leverage adjustment speed is influenced by real and accrual-based earnings manipulation over the period ۲۰۰۶-۲۰۱۹. We find evidence suggesting that the leverage adjustment speed in firms with a higher level of real and accrual-based earnings manipulation is slower than that of other firms. Specifically, we show that under-levered (over-levered) firms with a higher level of earnings manipulation tend to adjust their actual leverage toward an optimal level, faster (slower) than that of other firms. These results are robust to different metrics for real and accrual-based earnings management, an alternative set of leverage determinants, alternative sample periods, and various estimation methods.

Real Activities Manipulation, Accrual-based earnings manipulation, Optimal leverage, Speed of adjustment, Leverage deviation