Accounting and Auditing Research

Accounting and Auditing Research

The Effect of Earnings Management on the long-term Investment Productivity of Selected Companies Listed on the Tehran Stock Exchange

Document Type : Original Article

Authors
Mohammad Sadegh Zamannejad 1
Mohammad Osoolian 2
Seyed Jalal Sadeghi Sharif 2
1 Master Degree, Department of Management, Alborz Danesh University, Qazvin, Iran
2 Assistant Professor, Department of Financial Management, Shahid Beheshti University, Tehran, Iran
10.22034/iaar.2021.131572
Abstract
Earnings management takes advantage of how accounting rules are applied and create financial statements that inflate earnings or revenue. In breaking down earnings management, companies use earnings management to smooth out fluctuations in earnings and present more consistent profits each month or year. A company's stock price often rises or falls after an earnings announcement, depending on whether the earnings meet or fall short of expectations. In this research, we study the effect of earnings management on the long-term investment productivities of selected companies in Tehran Stock Exchange. We also study these companies in two separated groups, companies with Decreasing Earnings Management and companies with Increasing Earnings Management.
The results showed that the earnings management is not common among selected companies listed on the Tehran Stock Exchange. Most cases are increasing earnings management (over 88%). Increasing earnings management does not have a negative impact on the long-term investment productivity of these companies. But, increasing earnings management and investment productivity is inversely correlated. Also, decreasing earnings management has a negative impact on the long-term investment productivity of these companies.
Keywords
Earnings Management
Long-term Investment Productivity
Tehran Stock Exchange
Accounting and Auditing Research
Volume 13, Issue 49
Spring 2021
Pages 97-118