Document Type : Research Paper
Authors
Abstract
Decreasing interest conflicts between stockholders and executives is the
corporate governance’s role and this is accentuated when managers perceive
motivations to deviate from the advantage of stockholders. Corporate
governance is likely to diminish profit management while improving the
investors’ understanding of cash maintenance. This study aims at
recognizing relevance among real profit management and corporate
governance. To measure profit management, Recovery models (2006) and
Jenni (2010) and for measuring the relevance between cash maintenance and
profit management, modified models of Opler (1999) and Phama and Fringe
(1998) have been deployed in this study. Percentage of non-obligated
members of executive board (executive board independence) has been
utilized as the substantial feature of corporate governance. As for testing the
hypotheses, multi-variable linear regression model and integrated
generalized least squares method were used. Considering the limitations
imposed in selection, statistical sampling of the study includes 90 accepted
companies in Tehran Stock Exchange that have undergone research between
2008 and 2012. The findings indicate that there is a meaningful positive
relevance between real profit management and cash maintenance. Investors
decrease cash maintenance in companies with high real profit management
and compared to businesses with strong corporate governance, weaker ones
possess less evaluations of cash maintenance among those which perform
profit management in its high levels.
Keywords
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