Volume 1, Issue 1, November 2012, Pages 94–104
Hosein Aryaei Nejad1, Ahmad Abdollahi2, and Niloufar Kabiri3
1 Department of Accounting, Islamic Azad University, Kordkuy Center, Gorgan Branch, Kordkuy, Golestan Province, Iran
2 Department of Accounting, Golestan Institute of Higher Education, Gorgan, Golestan Province, Iran
3 Department of Accounting, Islamic Azad University, Kordkuy Center, Gorgan Branch, Kordkuy, Golestan Province, Iran
Original language: English
Copyright © 2012 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
The aim of the current study is to see the changes in the amount of benefit management regarding the firms whose liabilities increase to a large extent. The managers of these kinds of firms normally have more motivations to satisfy credit providers through profit management. But it seems that auditors and financial providers' more attention to these firms' leads to having more regular managers and decreasing profit management performance. The tested sample includes 136 firms among the accepted ones in Iran Stock Exchange considering a period of eight years from the beginning of 2000 to the end of 2007. In order to estimate the rate of profit management performance by the use of Jones adjusted model, the optional committed items were calculated. The hypotheses were tested via regression method. The results demonstrated that the increase of most liabilities causes the decrease of profit management performance. In fact, liability makes managers have less access to free cash flows in order to pay the liability and its interest; therefore, they cannot take advantage of the opportunities such as non-optimization investment, extra cost tolerance and earning waste. In other words, the more the liabilities increase, the more regular the managers perform.
Author Keywords: Profit Management, Accounting, Financial Leverage, Free Cash Flow, Tehran Stock Exchange.
Hosein Aryaei Nejad1, Ahmad Abdollahi2, and Niloufar Kabiri3
1 Department of Accounting, Islamic Azad University, Kordkuy Center, Gorgan Branch, Kordkuy, Golestan Province, Iran
2 Department of Accounting, Golestan Institute of Higher Education, Gorgan, Golestan Province, Iran
3 Department of Accounting, Islamic Azad University, Kordkuy Center, Gorgan Branch, Kordkuy, Golestan Province, Iran
Original language: English
Copyright © 2012 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract
The aim of the current study is to see the changes in the amount of benefit management regarding the firms whose liabilities increase to a large extent. The managers of these kinds of firms normally have more motivations to satisfy credit providers through profit management. But it seems that auditors and financial providers' more attention to these firms' leads to having more regular managers and decreasing profit management performance. The tested sample includes 136 firms among the accepted ones in Iran Stock Exchange considering a period of eight years from the beginning of 2000 to the end of 2007. In order to estimate the rate of profit management performance by the use of Jones adjusted model, the optional committed items were calculated. The hypotheses were tested via regression method. The results demonstrated that the increase of most liabilities causes the decrease of profit management performance. In fact, liability makes managers have less access to free cash flows in order to pay the liability and its interest; therefore, they cannot take advantage of the opportunities such as non-optimization investment, extra cost tolerance and earning waste. In other words, the more the liabilities increase, the more regular the managers perform.
Author Keywords: Profit Management, Accounting, Financial Leverage, Free Cash Flow, Tehran Stock Exchange.
How to Cite this Article
Hosein Aryaei Nejad, Ahmad Abdollahi, and Niloufar Kabiri, “The impact of financial leverage sharp increase on earnings management on the accepted firms in Tehran Stock Exchange,” International Journal of Innovation and Applied Studies, vol. 1, no. 1, pp. 94–104, November 2012.
