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The study aims at investigating the impact of real earnings management (REM) on the cross-sectional stock return after considering the moderating role of market effect, size effect, value effect and momentum effect.

The study uses weekly and monthly data of 3,085 Bombay Stock Exchange listed stocks spanning over twenty years, from January 2000 to December 2019. REM is measured through metrics developed by Roychowdhury (2006), namely, abnormal levels of operating cash flows, production costs and discretionary expenditure. The study employs univariate and bivariate portfolio-level analysis.

The findings deduced from the empirical results demonstrate that investors perceive downward REM as an element of risk; hence, they discount the stock prices at a higher rate. On the contrary, results show that investors positively perceive upward REM; hence, they hold the stocks even at a lower rate of return. This anomaly is found to be robust for all kinds of considered moderations.

The findings have important managerial implications as investors are found to assign different weights to different forms of REM, depending upon the perception regarding the magnitude of risk involved in different forms. Managers can accommodate this information during their short- and long-term corporate planning.

First, the study is among the earlier attempts to examine the association between REM and stock returns by considering the moderating role of cross-sectional effects. Second, the study considers the direction and endogenous nature of REM while investigating the issue.

The purpose of this paper is to study the influence of inflated energy prices on the capital structure of Indian manufacturing corporations and to investigate whether the capital structure of Indian firms is driven by demand shocks or supply shocks during the study period.

After conducting a thorough review of the capital structure and inflation-based research studies, panel data-based regression model and correlation matrix have been used as statistical tools for Indian manufacturing sector available with the Centre for Monitoring Indian Economy Prowess database.

The results suggest that variables like the presence of inflated energy prices had adversely influenced the capital structure of Indian corporations. Not only this, the study also highlights that factors pertaining to the demand shock had induced Indian corporations to have higher debt levels in the capital structure.

This study has laid some ground work to explore the influence of inflation on capital structure of Indian firms upon which a more detailed evaluation could be based.

To the best of the authors’ knowledge, this study is the first that explores the influence of inflated energy prices on the capital structure of manufacturing firms in India by using the most recent data.