Earnings management of follower companies in response to the reporting of leading industry companies fraudulently

Document Type : Original Article

Authors

1 Associate Prof., Department of Accounting, Faculty of Economic and Accounting , Central Tehran Branch, Islamic Azad University, Tehran, Iran.

2 PhD Student in Accounting , Department of Accounting, Faculty of Economic and Accounting , Central Tehran Branch, Islamic Azad University, Tehran, Iran.

10.30495/ijfma.2023.63262.1728

Abstract

Abstract

The aim of this study was to investigate the effect of fraud with earnings management and fraudulent financial reporting of a leading company in the industry on other companies in its group. In this regard, two hypotheses have been developed to answer the research questions. To test these hypotheses, the statistical population of the study consisting of companies listed on the Tehran Stock Exchange between 2010 and 2019 in a period of ten years (320 companies per year and 3200 companies - year) have been studied. To test the research hypotheses, first identify fraudulent companies based on expert consensus and use logistics regression model based on data panel and also calculate F-SCORE as an indicator of earnings management in companies and independent t-test to test the F-SCORE difference was used Before and after the fraud of each class of industry.
The results of the hypothesis test show that the follower companies, in response to the fraudulent financial reporting of the leading company, manage Earnings to show better performance and maintain the favorable opinion of capital market analysts regarding their performance compared to the performance of the leading company in their group. Also, RSST accruals Changes in accounts receivable and commodity accounts, all of which are integral components of earnings management, are significantly associated with financial reporting fraud.

Keywords

References

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