Exploring the Link between Earnings Management and Financial Risk Ratios: A New Evidence from Pakistan and Bangladesh Construction Sector (Cement Companies)

Abstract

The critical effort in this research is to observe the difference of mean in leverage, earning management, and financial distress between countries like Pakistan and Bangladesh. Based on the construction sector from Pakistan and Bangladesh, five cement companies are selected from each side to measure the difference in earning management, financial distress, and leverage in that sector. These firms are selected from the Karachi stock exchange and Dhaka stock exchange of public listed companies. The financial data of Bangladeshi firms are collected from the Dhaka Stock Exchange or their official websites. The economic data of Pakistani cement firms are gathered from their official websites. The result shows a meaningful difference in means for leverage, financial distress, and earnings management from Pakistan and Bangladesh. The present study is limited to the construction sector of Pakistan and Bangladesh. These results assist in the construction sector in Pakistan and in Bangladesh act in the light of results obtained in this study. This research may aid in the creation or improvement of knowledge among judgement call in firms throughout the world in terms of improving both financial leverage and earnings management.