Evaluating the Effect of Financial Health Indexes from the Aspect of Inhibiting and Opportunistic Behaviors of Income Management in Companies with Different Investment Opportunities

Subject Areas : Journal of Capital Market Analysis

Omid Sabaghiyan Toosi ¹ , Zahra Moradi ² , Shohreh Yazdani ³

1 - Department of Accounting، Damavand Branch ،Islamic Azad University، Damavand، Iran
2 - Department of Accounting، Damavand Branch ،Islamic Azad University، Damavand، Iran
3 - Department of Accounting، Damavand Branch ،Islamic Azad University، Damavand، Iran

Received: 2023-04-06 Accepted : 2023-06-09 Published : 2023-05-22

Keywords: Financial ratios, investment opportunities, Financial stress, Financial health, Voluntary Discretionary Accruals,

Abstract :

This research has compared effect of financial health indicators from the perspective of deterrence and opportunism in income management behaviors, based on the analysis of data from 320 companies during the years 2010-2020 using Eviews software in companies with different investment opportunities. To test the hypotheses of the statistical population using the middle of 4 methods MEQLDTA, MB, PPEQGMEQLD and GrowthPPE, and classified into two groups of companies with high and low investment opportunities. Hypotheses tested in OLS and ARMA methods. Then, based on the cumulative analysis of financial health factors, these variables were weighted. The results show that the variables of ROA with weight of (-7), RER with weight of (-4) and LDR with weight of (-3) were respectively effective in playing the role of deterrent from income management motivation. On the other hand, variables of LEV with weight of (+6), DLOSS with weight of (+5) and INDIR with weight of (+4) were respectively recognized as effective factors on the opportunistic behavior of income management in companies with different investment opportunities. In companies with low investment opportunities that are separated by MB method, based on the optimal value of the coefficient of determination and the negative relationship of financial health indicators, it is more likely that this group has high financial health based on the inhibition of income management’s motivation. On the other hand, the findings show that in companies with low investment opportunity separated by the Growthppe method, the opportunistic behavior of income management is more evident.