Impact of Financial Policy on Profit Management: A Case of Selected Algerian Companies

Abstract

The aim of this study is to explore whether the financial policy of Algerian companies affects profit management. In this research, financing policy is expressed by two indicators of financial structure: short-term debts ratio and leverage rati;, and two indicators of financing cost: financial charges and WACC. Profit management is measured by discretionary accruals based on the modified Jones (1995) model. The study includes 25 companies during the period of 2003-201. The research is based on 193 observations of an unbalanced panel data, depending on Multiple Regression through panel data estimation models. The results suggest that the relationship between financial structure indicators and profit management is not statistically significant. However, there is a positive and statistically significant relationship between WACC and profit management. The relationship between financial charges and profit management doesalso prove to be significant though negative.