The Impact of Accounting Conservatism and Managerial Attributes on Capital Structure Rebalancing: Evidence from Egypt

Elhabashy, Hanaa; Abou Sheashaa, Ahmed Mokhtar Ismail

doi:10.21608/sjsc.2025.356188.1549

The Impact of Accounting Conservatism and Managerial Attributes on Capital Structure Rebalancing: Evidence from Egypt

نوع المستند : المقالة الأصلية

المؤلفون

¹ كلية التجارة جامعة المنوفية

² مدرس كلية التجارة جامعة السويس

10.21608/sjsc.2025.356188.1549

المستخلص

This study investigates the impact of accounting conservatism and managerial attributes on the Speed of Adjustment (SOA) toward the optimal capital structure in Egyptian firms. The sample covers 45 non-financial firms listed on the EGX-100 index from 2018 to 2022, with 225 balanced observations. Givoly & Hayn (2000) and Beaver & Ryan (2005) are the indicators used to measure accounting conservatism. Managerial attributes are estimated through Managerial Ability, Managerial Entrenchment, and Overconfidence. The exploratory factor analysis calculated the managerial entrenchment index using four governance mechanisms: managerial ownership, board independence, CEO tenure, and CEO duality. The DEA-Tobit approach developed by Demerjian et al. (2012) is used to measure managerial ability. The indicator of Schrand & Zechman (2012) was utilized to assess managerial overconfidence. Data analysis employed the Generalized Method of Moments (GMM) estimator.

Results showed that capital structure is affected by firm characteristics and macroeconomic conditions, and the SOA is slow at 29.2%. Accounting conservatism increases firms' SOA toward optimal capital structure from 29.2% to 31.1%, with a 2.9% variance, compared to less conservative firms. Due to the positive effects of managerial ability, the SOA increased from 29.2% to 33%, with a 3.8% variance, closing the gap between the optimal and actual capital structure. Additionally, managerial entrenchment increased SOA to 33.8%, a 4.6% variance. Overconfidence also statistically affects capital structure adjustment speed toward optimality. The SOA increased to 33.7%, with a 4.5% variance due to managerial overconfidence.

الكلمات الرئيسية