The Role of Net Profit Margin, Leverage Ratio, and Tax Planning in Earnings Management: (Empirical Evidence from the Iranian Capital Market)
shahnaz Mashayekh
1
(
Department of Accounting, social science and Economics, Alzahra university, Tehran, Iran
)
Samira Movaffagh
2
(
)
Keywords: Net profit margin, leverage ratio, tax planning, earnings management.,
Abstract :
Objective: This research aims to investigate the impact of net profit margin, leverage ratio, and tax planning on earnings management in companies listed on the Iranian capital market.
Method: The statistical population of this study includes all public and over-the-counter companies accepted in the Iranian capital market. After applying selection criteria, a total of 232 companies were chosen as the sample. Data related to these companies were collected for a period of seven years, from 1396 to 1402.
Findings: The findings of the study indicated that net profit margin and tax planning have an inverse and significant relationship with earnings management. In fact, the first and third hypotheses were confirmed; however, the leverage ratio did not show a significant relationship with earnings management, and thus, the second hypothesis was rejected.
Conclusion: The findings demonstrate a significant inverse relationship between net profit margin and earnings management. This indicates that companies with higher profitability engage less in earnings management. Furthermore, there is no significant relationship between the leverage ratio and earnings management. This suggests that factors other than financial leverage, such as ownership structure, regulatory oversight, or cultural factors, play a more significant role in earnings management. Additionally, the results showed an inverse and significant relationship between tax planning and earnings management. This implies that companies that are active in tax planning focus more on cost management and improving their actual performance and are less likely to engage in presenting unrealistic reports.
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