The Effects of Firm Growth and performance on Tests of Earnings Management in Quarterly Settings

Subject Areas : Renewable Energy

Mohammad mesgar ¹ , Zahra Lashgari ² , Negar Khosravipour ³

1 - Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran (Correspondent)
3 - Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2021-06-29 Accepted : 2021-11-14 Published : 2022-02-20

Keywords: performance, Firm growth, Earnings Management in Quarterly, Modified Jones Model,

Abstract :

AbstractThe most Commonly used models in the literature review of accounting and finance researches is Jones –type discretionary accrual models which applied in earnings management tests. This study investigates the effects of the growth and performance variables of the firm on the quarterly earnings management test in companies listed on the Tehran Stock Exchange during the years 2009 to 2019. A screening method was used for sampling and a total of 74 companies (3256 quarter - firm) have been selected. In this study, hypotheses have been tested using multiple linear regression models and the results showed that the company's growth and performance indicators have an effect on modified Jones quarterly earnings management test. These results also showed that the dummy indicators of the company's growth and performance decile have a non-linear relationship with the quarterly earnings management. The results show that the adjusted R- square of earnings management (modified Jones model) has the lowest value in the model of total accruals (regardless of the quarter) and the highest numerical value in the model with virtual deciles of growth and company performance. The results also show that by replacing and simultaneously entering the growth and performance variables of the company, the numerical value of the adjusted R- square increases and finally reaches the maximum value in the model with dummy decile variables. And the dummy variables of the growth and performance of the company increase the power of the earnings management test (modified Jones model).