The cost of not choosing the earnings management of the following companies in response to the fraudulent financial reporting of the leading company

Subject Areas : Management Accounting

Elham  Tajiknia ¹ (PhD Student in Accounting, Central Tehran Branch. Islamic Azad university . Tehran . Iran)
ahmad  yaghoobnejad ² (Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran (Corresponding Author))
azita  jahanshad ³ (Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran)
amirreza  keyghobadi ⁴ (Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran)

Received: 2022-07-16 Accepted : 2022-07-16 Published : 2022-05-22

Keywords: financial reporting fraud, earnings management, Industry Leading Companies, Industry Following Companies,

Abstract :

In this study, a period is chosen when leading companies in their profit industries are faced with the motivation to choose earnings management in the face of fraudulent financial reporting of leading companies, but do not choose this option. Have been inflated by fraudulent financial reporting, and executives of companies in similar industries are under pressure to take earnings management measures. Using the Dechow Model F-SCORE index, two groups of similar companies in the industry were identified: a group of companies that have no evidence of earnings management in response to fraudulent financial reporting of the industry leader they have responded to fraud. COST OF Compensation CEO, capital cost, credit rating of two groups of companies were examined. The test results show that there is a relationship between non-earnings management and reduction in Compensation CEO, which means that companies in the period when they are motivated to do so and refuse to do earnings management experience a reduction in the Compensation of their CEO. Also, the cost of capital in companies without profit management is decreasing, but based on the results, this reduction can not be generalized to not choosing the option of profit management, and no significant relationship was observed between reducing the credit rating and not choosing the option of profit management.

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