A Comparative Study of the Relationship between Real Earnings Management and Earnings Management Based on Accruals to Achieve an Average Profitability

Document Type : Original Article

Authors

1 M.A Student of Accounting, Islamic Azad University, Rasht Branch, Rasht, Iran

2 Assistant Professor, Department of Accounting, Islamic Azad University, Tonekabon Branch, Tonekabon, Iran (Corresponding author)

Abstract

This research aimed to study the behavior of real earnings management and earnings management based on accruals to achieve an average profitability of listed companies in Tehran Stock Exchange. In this study, we focus on the optional operating cash flow, optional cost and production cost as real earnings management representatives as well as discretionary accruals as an earnings management accounting representative. The sample consisted of 84 companies out of 454 companies listed in Tehran Stock Exchange during the period 2011-2016. Multiple regression and combined data and GLS models (generalized least squares) were used to analyze the data. The results show that there is a significant relationship between real earnings management and earnings management based on accruals to achieve an average profitability of stock companies. There is also a positive and significant relationship between accrual-based earnings management and average profitability, a positive and significant relationship between real earnings management activities (production costs and cash flow from operations) and average profitability. Finally, there is a significant negative relationship between real earnings management (discretionary spending) and average profitability

Keywords

References

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International Journal of Finance & Managerial Accounting
Volume 2, Issue 7
October 2017
Pages 43-51

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