Behavioral analysis of the relationship between the rate of return on equity and earnings management based on the smooth transition regression approach
Behavioral analysis of the relationship between the rate of return on equity and earnings management based on the smooth transition regression approach
Subject Areas : Financial Knowledge of Securities Analysis
Yazdan Gudarzi Farahani
1
(
Assistant Professor, Department of Islamic Economics, Faculty of Economics and Administrative science, Qom University, Qom, Iran (Corresponding Author)
)
Leila Barati
2
(
PhD Student, Department of Financial Management, Tehran Science and Research Branch, Islamic Azad University, Tehran, Iran
)
Keywords: Return on equity, accrual earnings management, real earnings management, investment behavior, smooth transition regression.,
Abstract :
The purpose of this study was to investigate the effect of return on equity on the relationship between earnings management and investment behavior of companies. In this research, the statistical information of the period 2011-2022was used for the companies admitted to the Tehran Stock Exchange. When the return on equity decreases, the managers manage profits and invest less in order to reduce investment costs by postponing investment in projects, and these companies They are likely to face financial problems. In this study, in order to measure the relationship between the research variables, the panel data method and the smooth transition regression (STR) model were used. The obtained results indicated that the inclusion of the mediating variable of return on equity in the relationship between profit management and investment behavior among companies listed on the Tehran Stock Exchange was significant. According to the results obtained from the estimated nonlinear model, it was observed that when the transition variable i.e. return on equity is higher and lower than the average of this variable, the effect of accrual and actual profit management variables on investment behavior is different.