Financial Accounting
Azam Valizadeh Larijani; Farzaneh Yousefi Asl; Fatemeh Shirzadi; Niloofar Zamani
Abstract
One of the reports that companies are required to publish at the discretion of the Securities and Exchange Organization is the management interpretive report. Therefore, in this research, the relation between the presentation of management interpretative reports by companies and earnings management has ...
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One of the reports that companies are required to publish at the discretion of the Securities and Exchange Organization is the management interpretive report. Therefore, in this research, the relation between the presentation of management interpretative reports by companies and earnings management has been investigated. Also, considering the importance of the role of women in improving the financial reporting of companies, the effect of the presence of women in the board of directors on the aforementioned relation has been investigated. The statistical population of this research is the companies listed in the Tehran Stock Exchange and the Iranian Fara burse during the years 2011 to 2022. The hypotheses of this research have been tested using linear regression. The results of the research showed that the provision of interpretative management reports by companies has reduced earnings management. Also, the decrease in earnings management is more among companies that have used the presence of women among their board members.
Accounting and various aspects of finance
Saman Mohammadi; Zahra Oryaie; Ali Naderi
Abstract
Considering the impact of CEO Power on a bank’s performance, CEOs can play a role in social responsibility and earnings management. Given that earnings management in banks can have various effects on other industries and the overall economy, banks tend to practice earnings management more frequently ...
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Considering the impact of CEO Power on a bank’s performance, CEOs can play a role in social responsibility and earnings management. Given that earnings management in banks can have various effects on other industries and the overall economy, banks tend to practice earnings management more frequently than non-financial organizations. Furthermore, due to a lack of transparency and information asymmetry, banks are required to be more accountable to society than other industries. Therefore, this research aims to investigate the impact of CEO Power on the relationship between social responsibility and earnings management in banks. The research sample comprises 16 banks listed on the Tehran Stock Exchange Market and Iran OTC between 2016 and 2021. These banks were selected to test the research hypothesis. The findings of the study suggest that social responsibility has a significant negative impact on earnings management in banks. This implies that an increase in social responsibility may lead to a decrease in information asymmetry and lack of transparency, resulting in a decrease in earnings management. Furthermore, the findings of the study indicate that CEO power does not play a significant role in moderating the relationship between social responsibility and earnings management in banks.IntroductionIndeed, engaging banks in social responsibility practices is expected to be beneficial for their stakeholders. In this context, stakeholders are often attracted to banks with a good reputation for social responsibility. Therefore, executives may engage in social responsibility activities to gain support from stakeholders, defend themselves against stakeholder activism, manage their business reputation, or protect their own careers. However, executives may also engage in social responsibility activities to manipulate earnings management and hide their self-interest motivations, which leads to agency problems. These agency problems arise when executives take opportunistic actions such as earnings management to maximize their profits, increasing the bank's agency costs. Given the influence of powerful CEOs on a bank’s performance, powerful CEOs play a role in social responsibility and earnings manipulation. Therefore, CEO power is one of the most important determinants affecting managers’ decisions.the current research has several important aspects. First, it extends the literature on the effect of commitment to social responsibility activities on firm earnings management, with a specific focus on the banking sector. Second, the research fills a gap in the literature regarding the role of social responsibility in financial reporting. Previous studies have not provided a clear consensus on whether social responsibility commitment has a positive or negative impact on financial reporting quality. Given the diversity of findings reported by previous studies, more research is needed to focus on understanding how social responsibility commitment can affect financial reporting quality, as proxied by earnings management practices.Does social responsibility affect banks' earnings management? Does CEO power have a significant effect on the relationship between social responsibility and earnings management of banks and strengthen this relationship?Literature Review2.1. Corporate social responsibility and earnings managementTo understand the link between corporate social responsibility (SR) and earnings management (EM), previous studies have proposed two perspectives: the ethical perspective and the managerial opportunism perspective. The ethical perspective assumes that EM is negatively associated with SR, while the managerial opportunism perspective argues that EM and SR are positively related. This leads us to our first hypothesis:H1. There is a significant relationship between SR and EM.2.2. Corporate social responsibility, earnings management and CEO powerGiven the influence of powerful CEOs on bank’s performance, powerful CEOs play a significant role in both SR input and earnings manipulation. Therefore, CEO power is considered one of the crucial determinants affecting managerial decisions. Hence, CEO power may have a moderating effect on the relationship between SR and EM. Accordingly, we propose the following hypothesis:H2. Powerful CEOs moderate the SR–EM relationship. MethodologyThe statistical population of this research consists of banks enlisted in the Tehran Stock Exchange Market and Iran OTC. The data from 16 banks for the period between 2016 to 2021 have been analyzed to test the research hypotheses. The statistical method employed in this study is the regression model of mixed data using panel data approach with a random effects estimation.ResultsThe obtained results suggest that social responsibility has a negative and significant effect on bank’s earnings management. In other words, as social responsibility increases, earnings management in banks is expected to decrease. Furthermore, the results show that the significant relationship between social responsibility and earnings management is not maintained when the adjusting variable of the CEO's power is included. In other words, the CEO's power does not have a significant effect on the relationship between social responsibility and earnings management.Discussion and ConclusionWith an increase in activities related to social responsibility, banks experience a decrease in earnings management. This observation aligns with the ethical perspective and the signaling theory, which suggest that social responsibility can serve as a tool to reduce earnings management. Banks with higher levels of social responsibility not only exhibit greater transparency regarding their social responsibility initiatives and stronger engagement with stakeholders, but they also tend to engage in less earnings management. Additionally, the study found that CEO power does not moderate the relationship between social responsibility and bank earnings management. This finding contradicts the theoretical foundations and the research background, which propose that CEOs may use social responsibility to gain stakeholder support, manage their reputation, and defend against stakeholder activism. Therefore, it is evident that relying solely on CEO power and characteristics may not lead to accurate decision-making in this domain. Shareholders and other financial decision-makers should consider factors beyond CEO power when attempting to moderate the relationship between social responsibility and earnings management.
Financial Accounting
Mohsen Imeni; Seyyed Mohammad Moshashaei
Abstract
The two approaches are more prominent in the accounting literature, accrual-based earnings management and manipulating the actual activities however, the present study is considered the third type of earnings management model, namely a classification shifting. The purpose of this study is to investigate ...
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The two approaches are more prominent in the accounting literature, accrual-based earnings management and manipulating the actual activities however, the present study is considered the third type of earnings management model, namely a classification shifting. The purpose of this study is to investigate the effect of constraints on earnings management strategies on the application of shifting strategy in earnings classification in the Iranian capital market. The research sample consisted of 114 firms from 2013 to 2021 (1026 observation). Logistic regression models have been used to test research hypothesis. The results of the study show that financial health, institutional shareholders, audit firm size and market share have a negative and significant effect on the classification shifting. Also, the operating cycle has a positive and significant effect on the c classification shifting; and its tenure does not have a significant effect on the classification shifting. Additional tests indicated large companies have a greater incentive to do classification shifting (a form of earnings management) compared to small companies, because they have greater political costs.
Accounting report
Elnaz Akbarlou; Mehdi zeynali; Mehdi alinezhad sarokolaei; Rasoul baradaran hassan zadeh
Abstract
Narcissist managers, with behavioral characteristics such as selfishness, domination, and self-aggrandizement, don’t consider rules and regulations important. They manipulate detailed accounting reports opportunistically using positive words in an optimistic manner. This study aims to investigate ...
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Narcissist managers, with behavioral characteristics such as selfishness, domination, and self-aggrandizement, don’t consider rules and regulations important. They manipulate detailed accounting reports opportunistically using positive words in an optimistic manner. This study aims to investigate the relationship between managers' narcissism and the optimistic tone of financial reporting with the moderating role of earnings management. To measure narcissism, two proxies are used: the area of managers’ signatures and the ratio of managers' remuneration to the total annual salary of employees, and vocabulary frequency as a criterion to measure optimistic tone. The sample includes 115 companies listed in Tehran Stock Exchange throughout 2011- 2018. To test the research hypotheses, regression has been used. Results indicate that there is a positive and meaningful correlation between the narcissism of managers and the optimistic tone in financial reporting. In other words, narcissist managers consider financial reports prepared based on an optimistic tone as an opportunity to satisfy their insatiable desire for self-promotion. Earnings management has got a positive moderating effect on the correlation of narcissism of managers and optimistic tone in financial reporting.
Aso Bahrami; Iraj Noravesh; abbas Raad; ata mohamadi molqarani
Abstract
The overall purpose of publishing financial statements is to provide information about financial status, performance results, and cash flows to stakeholders. Users' trust, especially investors, shareholders, and creditors, with the information in these statements is an incentive that leads one to fraud ...
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The overall purpose of publishing financial statements is to provide information about financial status, performance results, and cash flows to stakeholders. Users' trust, especially investors, shareholders, and creditors, with the information in these statements is an incentive that leads one to fraud in financial reporting. The purpose of present research is to predict fraud in fraudulent financial statements fraud. This triangle is based on the assumption that one is motivated to commit fraud when there are three elements of fraud. These three elements are 1. some perceived motivations for fraud, 2. some opportunities for fraud, and 3. methods of reasoning that fraud does not harm the value of the perpetrator (Cressey, 1973). In this study, the dependent variable of financial statement fraud is used by the researcher as a substitute for earnings management (profit). Independent variables include the pressure of financial stability, the greed of the perpetrator, ineffective supervision, effective supervision, the pressure of external expectations, and predicted financial goals. The statistical population of the study is listed companies in Tehran Stock Exchange and the statistical sample of 98 companies is selected through systematic elimination method during the years 2012 - 2018. The results of testing the research hypotheses using multivariate regression model and panel data model showed that the pressure of financial stability has a significant relationship with financial statements Fraud.
Mohammad Reza Abbaszadeh; Javad Rajabalizadeh; Mostafa Ghannad
Abstract
In firms with political connections, Related party transactions may be facilitate the goals of this. In other words, related party transactions in firms with political connections and existence influential members, could lead to abuse of company resources and therefore the earnings management. The purpose ...
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In firms with political connections, Related party transactions may be facilitate the goals of this. In other words, related party transactions in firms with political connections and existence influential members, could lead to abuse of company resources and therefore the earnings management. The purpose of this study, first, is examining the relationship between political connections and related party transactions, second, investigation the impact of political connections on relationship between the related party transactions and earnings management. In this paper, political connections are measured by factor analysis and including five variables: stock market value, assets book value, income taxes, number of employees and the insurance payment. In order to test the research hypotheses, we use 120 companies financial information in the Tehran Stock Exchange in the period 2010 to 2017 and analyze this information with multiple linear regression an panel data. The results showed a positive and significant relationship between political connections. also, not found significant relationship between related party transactions and earnings management, but with the addition of political connections, found positive relationship between the related party transactions and earnings management
Gholamreza Kordestani; Javad Rezazadeh; Javad Rezazadeh
Abstract
Investigating the Relation Between Accruals and Operating Cash Flows and Effective Factors on this Relation can be useful for shareholders and capital market analysts. The purpose of this study is to investigate the Relation Between Accruals and Operating Cash Flows and Effective Timing and Economic ...
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Investigating the Relation Between Accruals and Operating Cash Flows and Effective Factors on this Relation can be useful for shareholders and capital market analysts. The purpose of this study is to investigate the Relation Between Accruals and Operating Cash Flows and Effective Timing and Economic Factors on this Relation. To do so, data of 107 stocks listed in Tehran Stock Exchange in a period of 11 years during 2005 to 2015 were analyzed. First of all, with utilization of times-series regression, the relationship between accruals and cash flows over time were examined. Afterwards, Effective Timing and Economic Factors that could affect this relation were considered utilizing Time-Series Regressions. The results indicate a significant negative relationship between Accruals and Operating Cash Flows showing drops from about -0/997 in 2005 to -0/347 in 2015. Furthermore, out of five potential factors, three of which including Timing-Related Cash Flow Shocks, increases in non-timing-related accrual recognition, as proxied by one-time and non-operating items and the growth of intangible-intensive industries play a role in the majority of the overall decline. In other words, the growth in the frequency and the magnitude of these items has given rise to a decrease in the negative accrual–cash flow relation and operational Cash Flow Shocks throughout the project.
afshin ahmadi looye; Hashem Nikoomaram; Fraydoon Rahnamay Roodposhti; Bahman Banimahd
Abstract
In the present study, for the first time, we investigate the effect of the right of auditor's choice on the Accruals based Earnings management based on Glaser's choice theory. The findings of the empirical Reviews by the use of OLS regression on a sample of 173 active firms in Tehran Stock Exchange during ...
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In the present study, for the first time, we investigate the effect of the right of auditor's choice on the Accruals based Earnings management based on Glaser's choice theory. The findings of the empirical Reviews by the use of OLS regression on a sample of 173 active firms in Tehran Stock Exchange during the period from 2009 to 2018(1730 year-firm) show that accrual based Earnings management for Roach firms is more than unroach firm. The results of this research for the first time show that the process of selecting an auditor in Iran follows an opportunistic approach. Therefore, the findings of this study can help investors and the stock exchange organization of the country in the field of legislation to deal with opportunistic managers, such as access to stock options of the ROARCH Group. In this study, firstly, by studying the theoretical foundations of the publishing of asset-backed securities and other sources of information, such as guidelines issued by the Capital Markets Authority, the International Institutions and International Financial Institutions' Guidelines, the Primary Model The asset back rating was extracted, and then this model was developed for the purpose of obtaining consensus and Delphi Research methodology was subjected to an expert opinion survey and ultimately the final model of asset-backed securities ranking was presented.
Abbas i Aflatooni
Abstract
Some valuation models use the accounting earnings and others use the cash flows as inputs to measure the intrinsic value of stocks. The empirical evidences show that the performance of earnings-based models is generally higher than that of non-earnings-based models. In addition, based on empirical evidences, ...
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Some valuation models use the accounting earnings and others use the cash flows as inputs to measure the intrinsic value of stocks. The empirical evidences show that the performance of earnings-based models is generally higher than that of non-earnings-based models. In addition, based on empirical evidences, earnings management that is done using accruals and real activities manipulation; shift the earnings quality, and using the managed earnings in earnings-based valuation models lead to incorrect results. The first stage of this research that is done on 116 firms listed in Tehran Stock Exchange from 2003 to the end of 2013 compares the performance of Residual Income Model (RIM) and discounted cash flow model (DCF). The second stage compares the performance of mentioned models in suspected and non- suspected firms to earnings management and to control the effects of some variables on results, the regression analyses is applied. The research results show that, although in total sample the performance of RIM is higher than that of discounted DCF, the performance of RIM is significantly lower than that of DCF in suspected firms.
Abstract
Some valuation models use the accounting earnings and others use the cash flows as inputs to measure the intrinsic value of stocks. The empirical evidences show that the performance of earnings-based models is generally higher than that of non-earnings-based models. In addition, based on empirical evidences, ...
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Some valuation models use the accounting earnings and others use the cash flows as inputs to measure the intrinsic value of stocks. The empirical evidences show that the performance of earnings-based models is generally higher than that of non-earnings-based models. In addition, based on empirical evidences, earnings management that is done using accruals and real activities manipulation; shift the earnings quality, and using the managed earnings in earnings-based valuation models lead to incorrect results. The first stage of this research that is done on 116 firms listed in Tehran Stock Exchange from 2003 to the end of 2013 compares the performance of Residual Income Model (RIM) and discounted cash flow model (DCF). The second stage compares the performance of mentioned models in suspected and non-suspected firms to earnings management and to control the effects of some variables on results, the regression analyses is applied. The research results show that, although in total sample the performance of RIM is higher than that of discounted DCF, the performance of RIM is significantly lower than that of DCF in suspected firms.
Ahmad Ahmadpoor; asoomeh hahsavari
Volume 11, Issue 41 , April 2014, , Pages 37-58
Abstract
This study investigates how management Authority of bankrupt firms performs in reporting future profitability and earnings quality effect in Tehran Stock Exchange during 1385-1390. Discretionary accrual is considered as measure of earnings management. Also in this study, it is investigated the effect ...
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This study investigates how management Authority of bankrupt firms performs in reporting future profitability and earnings quality effect in Tehran Stock Exchange during 1385-1390. Discretionary accrual is considered as measure of earnings management. Also in this study, it is investigated the effect of accounting-based earnings attributes on future profitability separately: accruals quality, earnings persistence, earnings predictability, and earnings smoothness. The results of estimating unbalanced panel data technique for 55 firms subjected to bankruptcy of Altman's model show that the Bankrupt companies tend to be opportunistic earnings management. We also find that earnings management performs better than earnings quality in predicting future profitability.
V. Mojtahedzadeh; S. Sadeghi Askari
Volume 8, Issue 31 , October 2010, , Pages 33-60
Abstract
This study examines the impact of earnings management on the value -relevance of financial statement information by considering short-term and long-term discretionary accruals. This study uses valuation framework, developed by Ohlson (1995) and Jones (1991) as basis for developing two distinct models ...
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This study examines the impact of earnings management on the value -relevance of financial statement information by considering short-term and long-term discretionary accruals. This study uses valuation framework, developed by Ohlson (1995) and Jones (1991) as basis for developing two distinct models to examine short-term and long-term discretionary accruals.10 hypotheses have been designed for this purpose. To examine these hypotheses we use the information of 100 companies listed on Tehran - Stock -Exchange during 1383–1387 and Pierson correlation. The results demonstrate that, both Earnings and Book Value have value-relevance information about firms' value. Moreover, earnings management via short-term, long- term and total discretionary accruals reduce value relevance of earnings but value relevance of book value reduce only in presence of earnings management via long-term discretionary accruals.
M. A. Aghaei; A. A. Javan; M. Nazemi Ardakani; E. Mousavi
Volume 7, Issue 25 , April 2009, , Pages 87-103
Abstract
Decision making about capital structure and determining its effectiveness is increasingly important subject in managing of firms. In addition, earnings management is one of the effective factors on capital structure in corporate governance subjects. This study aimed to investigate the impact of earnings ...
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Decision making about capital structure and determining its effectiveness is increasingly important subject in managing of firms. In addition, earnings management is one of the effective factors on capital structure in corporate governance subjects. This study aimed to investigate the impact of earnings management, Profitability ratios and firm size on the capital structure of listed companies of Tehran Stock Exchange (TSE) in the period of 1382-1386. A sample of 125 companies of TSE was taken for research study. For the analysis of data, multiple regression model approach was applied. Gearing ratio was taken as dependent variable whereas absolute discretionary accruals, ROA, ROE, and Size were used as independent variables. The results indicate that absolute discretionary accruals have insignificant effect on dependent variable. According to the results, Size, and ROE have positive Impact on the capital structure of the listed companies in Tehran stock exchange.
Hamid Bodaghi; HamidReza Bazaz Zadeh
Volume 5, Issue 17 , April 2007, , Pages 173-212
Abstract
The most investigation of earnings Management literature are about why and how earnings management are done and what the results of this behavior i s. But there have been very few researches on the ways to controlling this. This research pays attention to more and more complete disclosure as an approach ...
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The most investigation of earnings Management literature are about why and how earnings management are done and what the results of this behavior i s. But there have been very few researches on the ways to controlling this. This research pays attention to more and more complete disclosure as an approach for reducing earnings management.
In this research, disclosure quality is prepared and measured, using a check list containing 235 mandatory disclosure items (as Iranian accounting standards). Earnings management is also measured, using modified Jones Model, on discretionary accruals, and are finally used for testing the hypothesis. Hypothesis are tested as cross- sectional for the years 1382 to 1384 and accumulated.
The results in year to year investigations only for the year 1384 show statistically significant negative relationship between disclosure quality and earnings management. And in total of three years, investigations show no significant relationship.
