Investigate earnings management at the sensitive earnings amounts’ threshold of companies with high financial leverage

Subject Areas : Management Accounting

SARA shafiee ¹ (Visiting Professor, Department of Accounting, Islamic Azad University, UAE Branch, Dubai, UAE)
hamidreza kordlouie ² (Associate Professor and Faculty Member of Islamic Azad University, Islamshahr Branch, Islamshahr, Iran. (Corresponding Author))
shadi shahverdiani ³ (Assistant professor, management department, Islamic Azad University, Shahre Qods branch, Iran)
maziyar ghasemi ⁴ (Assistant Professor, Department of Management, Adiban Higher Education Institute, Garmsar, Semnan, Iran)

Received: 2022-07-16 Accepted : 2022-07-16 Published : 2022-05-22

Keywords: Abnormal Discretionary Expense, Abnormal Optional Cost, Earnings Threshold, financial leverage, Real Profit Management,

Abstract :

The purpose of this study is to investigate real earings management on the threshold of sensitive amounts of earnings in companies suspected of earnings management and in terms of high financial leverage, which was conducted among 148 listed companies and their financial information between 1392 and 1399. In this study, abnormal production costs and abnormal discretionary expenses for companies suspected of earings managing whose financial leverage was above average were examined in the three thresholds of zero- earnings, previous earnings and forecasted earnings. The results show that in all three profit thresholds, when the financial leverage is more than average, then this leverage has a negative and significant effect on abnormal production costs and abnormal discretionary expenses. Only in abnormal production costs of the previous earning threshold that no significant impact has been identified.

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