A Study of the Relationship between Financial Leverage and Real Earning Management of Listed Companies in Tehran Stock

Journal of Accounting Advances (J.A.A)
Vol. 5, No. 1, 2013, Ser. 64/3
 
 
Extended Abstract
 
A Study of the Relationship between Financial Leverage and Real Earning Management of Listed Companies in Tehran Stock Exchange
 
     Dr. N. Izadinia                 H. Rabiee                        N. Hamidian
University of Isfahan            University of Arak              Sheikhbahaei’s                                            
University, Isfahan
                                                                         
Introduction
In the accounting literature, numerous studies have been conducted on earnings management and financial leverage. Also, studies show if there is financial leverage, companies tend to manipulate earnings using the real earning management.
 
Research Questions
The purpose of this research is to investigate the relationship between financial leverage and real earnings management of listed companies in Tehran Stock Exchange.
 
Methods
In this research, 118 companies were surveyed during 1379-1389. To follow Zarvyn & Cohen's (2010) research, the criteria of real earning management included abnormal operating cash flows, abnormal cost of production and abnormal discretionary expenditures. Real earning management is considered as dependence variable and financial leverage is considered as independence variable. In this research  multivariate regression models have been used and the data was combined in order to review relationship between financial leverage and criteria of real earning management.
 
Results
The results showed that there is a negative and significant relationship between financial leverage and criteria of real earning management including abnormal operating cash flows, abnormal cost of production and abnormal discretionary expenditures.
 
Keywords: Financial leverage, Real earnings management, Abnormal cash flows from operations, Abnormal discretionary expenditures, Abnormal cost of production.