Type of Earnings Management in Iranian Companies Listed in Tehran Stock Exchange (TSE)

Abstract

This study investigates whether earnings management motivated by opportunistic behavior or efficient contracting, for this purpose we examine a relationship between discretionary accruals and future profitability. Based on the explanatory power (adjusted R2), one of models exist in literature is selected to decompose total accruals into discretionary and non-discretionary-accrual components. We measure future profitability by use of each of three variables include one-year-ahead cash flows from operation, non-discretionary net income and change in earnings. Using multiple regressions, we find evidence that the type of earnings management selected by TSE listed firms tends toward efficient earnings management.

Keywords

• discretionary accruals
• earnings management
• efficient earnings management
• opportunistic earnings management