بررسی تاثیر مدیریت واقعی سود بر رفتار سرمایه گذاری

Journal of Accounting Advances (J.A.A)
Vol. 5, No. 1, 2013, Ser. 64/3
 
 
Extended Abstract
 
The Impact of Real Earnings Management on Investment Behavior of Companies Listed on Tehran Stock Exchange
 
     Dr. O. Pourheidari              Dr. A. Rahmani           R. Gholami
Shahid Bahonar University      Alzahra University     Shiraz University
 
Introduction
This paper examines how real earnings management activities affect firms’ investment activities. Although there is a large literature on earnings management, there is a dearth of evidence on how it affects firms’ real activities. Healy and Wahlen (1999) point out that earnings management studies have paid only minimal attention to its real economic consequences. Research on the consequences of earnings management has concentrated largely on the external, financial impacts. In contrast, the present study investigates the impact of real earnings management on internal, real decisions firms undertake.
One might suppose that if management chooses to paint a rosier view for investors in the numbers they report externally, then they would not allow this to influence internal investment decisions. However, it is possible that investment decision makers within the firm believe the misreported growth trend—because they are either over-optimistic or unaware of the misstatement—and invest accordingly. Alternatively, investment decision makers might understand the true state of the firm but choose to overinvest in a high-risk approach to turn around firm’s performance (McNichols and Stubben, 2008). Kedia and Philippon (2006) suggest that firms engaged with earnings management, manipulate the investment decisions to pool with better performing firms, in order to avoid detection.
Regardless of the reason for the overinvestment, truthful reporting might have prevented it. Several parties are typically involved in investment decisions. If financial results are reported truthfully, then other parties could enter in order to control the investment. As a result, firms invest more than they otherwise would have; thus attempts to meet capital market expectations or meet bonus targets, for example, could affect investors, employees, customers, and a broad set of related parties.
 
Research Questions or Hypotheses
This study investigates whether and how a firm’s investment behavior is influenced by real earnings management activities. On the other hand, we try to find out how managers’ reaction to real earnings management activities in the context of their investment decisions. Simply, we attempt to answer the following question:
Is there any significant relationship between real earnings management proxies (abnormal operating cash flows, abnormal production costs and abnormal discretionary expenses) and firms’ excess investment?
Given sales levels, firms that manage earnings upwards are likely to have one or all of these: unusually low cash flow from operations, and/or unusually low discretionary expenses, and/or unusually high production costs (Cohen and Zarowin, 2008). So, we can develop our research hypotheses as follows:
H1: There is a significant negative relationship between abnormal operating cash flows and excess investment.
H2: There is a significant positive relationship between abnormal production costs and excess investment.
H3: There is a significant negative relationship between abnormal discretionary expenses and excess investment.
 
Methods
We have used data for 63 listed companies on Tehran Stock Exchange for the period of 1378-1388 (1999-2009) to test the above hypotheses. We first generated the normal levels of CFO, discretionary expenses and production costs using the model developed by Dechow, Kothari and Watts (1998) as implemented in Roychowdhury (2006). To answer the research questions, this paper analyzes the relationship between proxies of real earnings management and firm’s excess investment by multiple linear regressions.
 
 
Results
The results indicate significant relationships between abnormal operating cash flows, abnormal discretionary expenses (as independent variables) and excess investment, suggesting that firm’s investment behavior is influenced by real earnings management. Our results also indicate a significant relationship between abnormal discretionary expenses and firm’s excess investment in the period afterwards.
 
Discussion and Conclusion
Managers do not have a direct preference for investing, but the requirements of signaling compel them to act in a consistent manner. The essential point that emerges is a general one: in any signaling equilibrium investment must be consistent with reported profits. In alternative interpretations, such as managerial optimism or empire building, managers might have a primary desire for investment, but it is the same requirement of consistency that lead them to manipulate earnings. In both cases, earnings manipulation is a necessary condition for overinvestment.
 
Keywords: Real Earnings Management, Excess Investment, Overinvestment, Underinvestment.