Investigating actual and accrual earnings management in companies
DOI:
https://doi.org/10.61841/2vcfh963Keywords:
Political Companies, earning Management, Accruals, Optional Accruals, ConservatismAbstract
This research examines the relationship between accounting conservatism and earning management. The research population includes the companies listed in Tehran Stock Exchange whose periods are from the beginning of 2010 to the end of 2018. For this purpose, we selected 65 companies as the sample. 19 companies are of political connection and 46 companies are without no political connection. Multiple linear regression models and t-test were used to investigate the research hypotheses. The results show that there is a negative and significant relationship between conservatism and earning management in companies without political connections and companies with political connections. The conservatism in companies with political connections is low compared to other companies and statistically significant. The results also show that the amount of earning management used in companies with political connections is high compared to other companies and statistically significant. There is also no significant difference in earning management and conservatism in politically non-connected and dependent companies.
Downloads
References
[1] Ebrahimi Kordlar, Ali & Arabi, Mohammad Javad, 2010. Ownership Concentration and Earning Quality in Companies Listed in the Tehran Stock Exchange. Financial Accounting Researches, Second Year, No. 2, Issue 4, P. 95-110.
[2] Ebrahimi Kordlar, Ali & Shahriari, Ali Reza (2009). Investigating the Relationship between Political Costs and Conservatism (Political Hypothesis) in Tehran Stock Exchange. Quarterly of Accounting and Auditing Studies, 57: 3-16.
[3] Ebrahimi Kordlar, Ali & Elham Hassani Azar Daryani, 2006, Investigation of Earning Management at Early Release of Public Shares in Companies Listed in Tehran Stock Exchange, Accounting and Auditing Studies, No. 45.
[4] Etemadi, Hussein & Farajzadeh Dehkordi, Hasan (2012). Impact of Earning Management and Capital Structure on Earning Conservatism. Quarterly of Accounting and Auditing Researches, Vol. 4, No. 13, 1- 19.
[5] Ghaemi, Mohammad Hussein & Mohammad Hussein Vadiei & Meysam Hajipour (2010). Impact of Conservatism on Earning Stability and Price-to-Earnings Ratio, Journal of Accounting Knowledge, Year 1, No. 2, pp. 53-77.
[6] Kurdistani, Gholamreza & Mehdi Khalili (2011). Effect of conservatism on the differential information content of cash flows and accruals. Journal of Accounting Knowledge, Second Year, No. 4, pp 83-104.
[7] Karimi, Mohsen (2006), Earning Management and its Role in the Capital Market, MSc Thesis, University of Mazandaran, pp. 19-20.
[8] Accounting Standards Setting Committee (2007). Accounting Standards: Theoretical Concepts of Financial Reporting, Audit Organization
[9] Mashayekhi, Bita & Mehdi Mohammad Abadi & Reza Hesarzadeh (2009). Impact of Accounting Conservatism on Earnings Stability and Distribution. Accounting and Auditing Studies, No. 56, pp. 107- 124.
[10] Nasrollahi, Zahra & Aref Manesh, Zohreh, 2010. Investigating the Relationship between Ownership and Earnings Quality in Companies Listed in Tehran Stock Exchange, Accounting Knowledge, Vol.1, No. 3,
pp. 117-138.
[11] Nourvash, Iraj & Sepasi, Sahar & Nikbakht, Mohammad Reza; (2005); Investigation of Earnings Management in Companies Listed in Tehran Stock Exchange, Journal of Social and Human Sciences, Shiraz University, Vol. 22, No. 2.
[12] Abed. S, Al-Badainah.J, Abu SerdanehThe.J (2012). Level of Conservatism in accounting Policies and Its Effect on Earnings Management, International Journal of Economics and Finance 4:78-85.
[13] basu. S 1997.the conservatism principle and the asymmetric timeliness of earnings, journal of accounting and economics.pp24.337
[14] Bhattacharya U and Daouk H and Welker M.(2001), "The World Price of Earnings Management".Working paper. Indiana University.
[15] Bliss Mark A. and Gul Ferdinand A. (2012) Political connection and leverage: Some Malaysian evidence, Volume 36, Issue 8, August 2012, Pages 2344–2350.
[16] Boubakri, N., Guedhami, O., Mishra, D., Saffar, W. (2012). Political connections and the cost of equity capital. Journal of Corporate Finance, 18 (3): 541–559.
[17] Chen Donghua, Jieying Li, Shangkun Liang and Guojun Wang(2011) Macroeconomic control, political costs and earnings management: Evidence from Chinese listed real estate companies, China Journal of Accounting Research 4 PP. 91–106.
[18] Datta .D, 2012 Political Connection and Firm Value – Theory and Indian Evidence ... papers.ssrn.com/sol3/papers.cfm.
[19] Fraser, D.R., Zhang, H., Derashid, C., (2006). Capital structure and political patronage: The case of Malaysia. Journal of Banking and Finance, 30(4):1291–1308.
[20] García, J.M, and G.Beatriz and F.Penalva (2012).Accounting conservatism and the limits to earnings management.http://ssrn.com/abstract.
[21] Guay, W. and R. Verrecchia. 2006. Discussion of an economic framework for conservative accounting and Bushman and Piotroski (2006). Journal of Accounting and Economics, 42: 149-16.
[22] Kousenidis, D.V, Ladas, A.C and Negakis, C.I(2009).Value Relevance of conservatism and non-conservatism accounting information . evidence from Greece. The international journal of accounting,44,219-238.
[23] Lafond,R .and Watts, R,L.(2006).THE information role of conservatism. The accounting Review 83,447-478.
[24] Lara, J. M. G., B. G., Osma, and A. Mora. (2005). The Effect of Earnings Management on the Asymmetric. Journal of Business Finance & Accounting, 32(3/4), 691-726.
[25] Iyengar, R. J., and Zampelli, E. M. (2010). Does Accounting Conservatism Pay?. Accounting and Finance, 50, 121–142.
[26] Niessen S. Ruenzi,2012 Political Connectednessand Firm Performance: Evidence From Germany. CFR- Working Paper NO. 07-15.
[27] Paul K. Chaney, Mara Faccio, David Parsley, The quality of accounting information in politically connected firms, Journal of Accounting and Economics 2011; 51: 58-76.
[28] Song Yu, Lina Wang and Zi Yan (2011) Impacts of Political Connections on Earnings Quality of Chinese Private Listed Companies, Advances in Education and Management Communications in Computer and Information Science Volume 211, pp 85-92.
[29] Watts, R.L., and J. Zimmerman, (1986), "Positive Accounting Theory".
[30] Yeh Yin-Hua, Pei-Gi Shu and Shean-Bii Chiu(2013) Political connections, corporate governance and preferential bank loans, Pacific-Basin Finance Journal 21 PP. 1079–1101.
Downloads
Published
Issue
Section
License
This work is licensed under a Creative Commons Attribution 4.0 International License.
You are free to:
- Share — copy and redistribute the material in any medium or format for any purpose, even commercially.
- Adapt — remix, transform, and build upon the material for any purpose, even commercially.
- The licensor cannot revoke these freedoms as long as you follow the license terms.
Under the following terms:
- Attribution — You must give appropriate credit , provide a link to the license, and indicate if changes were made . You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
- No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
Notices:
You do not have to comply with the license for elements of the material in the public domain or where your use is permitted by an applicable exception or limitation .
No warranties are given. The license may not give you all of the permissions necessary for your intended use. For example, other rights such as publicity, privacy, or moral rights may limit how you use the material.
