Analysis of the relationship between debt maturity structure and profit management strategy

Abstract

Profit management is a type of manipulation in the financial reporting process that is done by company managers for personal gain. Although many researches have been done regarding the different aspects of profit management, including its goals, motivations and methods, very few researches have addressed the role of debt settlement and analyzing its structural relationship. Earnings management is the use of authorized accounting and reporting authorities in order to achieve important objectives. On the contrary, in profit management in real terms, investment and financing in order to achieve important indicators is the main goal. Examples of real earnings management include manipulating discretionary costs, excess production, offering year-end price discounts, and timing the sale of assets and investments. Another variable that is analyzed in this research is the debt structure variable. The debt structure is one of the important indicators that determine the company's success and causes the company's sustainable growth. Therefore, decisions related to the debt structure are vital for the business survival of the company. Previous researches related to debt and profit management generally show the effective and determining role of debt. In a situation where the company's credits do not meet the obligations and there is a possibility of bankruptcy, under these conditions managers manipulate accruals to avoid non-fulfillment of obligations to debt and lending contracts.