The Relationship of Earnings Management and Investment Opportunities with Emphasizing on Ownership Concentration

Subject Areas : Journal of Investment Knowledge

Vida Mojtahedzadeh ¹ ( Associate Professor of Accounting, Al-Zahra University )
Raziyeh Saadat ² ( Student of MA of Accounting, Al-Zahra University )

Received: 2012-05-24 Accepted : 2012-08-11 Published : 2012-08-11

Keywords: earnings management, investment opportunities, Growth assets, Absolute abnormal accruals, Ownership concentration,

Abstract :

This research attempts to investigate the relationship of investment opportunities and earnings management with respect to ownership concentration. Earnings management is measured by using absolute abnormal accruals proxy through Ball and Shivakumar model (2006-2008). Investment opportunities calculated as an independent variable through geometric growth, market-to-book asset ratio and factor analysis of these two indicators. Control rights and deviation between cash flow rights and control rights was considered as a measure for ownership concentration. Results indicate there is not any significant relationship exists between assets geometric growth and earnings management. Although, there is a significant relationship exists between high market-to-book ratio and factor analysis of these two indicators and earnings management. Furthermore, ownership concentration has not a significant effect on earnings management and investment opportunities and controlling shareholders do not use their monitoring role and their power to protect shareholders.