Overinvestment, type of subsequent earning management and CEO tenure: Evidences from TSE

Abstract

This study examines the relationship between overinvestment, type of subsequent earnings management and tenure of CEO's of listed companies in Tehran Stock Exchange during the period from 2005 to 2016 deals. One of the main objectives of this study is that after overinvestment, managers how the subsequent financial incentives to distort information for the benefit of shareholder expectations about return on investment? Also, given that CEO tenure with his ability to influence the allocation of corporate resources and related financial reporting process, it is assumed that a positive relationship between overinvestment and subsequent earning management does not apply for the new CEOs. In the present study to measure the accrual earning management the Kothari, Leon and Wesley (2005) model, and to measure actual earnings management Dichow et al. (1998) model and the Roychowdhury (2006) model and to measure overinvestment Richardson (2006) model were utilized. The results show that the firms’ current overinvestment has positive and significance relationship with accrual and real earnings management. In addition, the results showed that there is no significant relationship between overinvestment and earnings management (accrual and real) with CEO tenure.

Keywords

• overinvestment
• real earning management
• accrual management
• ceo tenure