Earnings Management Tools in Distressed and Healthy Firms

Document Type : Research Paper

Authors

1 Urmia university

2 Associate Prof. of accounting at Imam khomeni international univesity

3 Associate Prof. of accounting at Emam khomeini international univesity

Abstract

Knowing about distortion of the accounting information is important for all stakeholders who make their decisions based on the annual reports of firms. So, this paper is aimed to compare earnings management in distress and healthy firms. The sample consists of 312 firms listed in Tehran Stock Exchange and out of the counter during the period from 2006 to 2015.  Results show that both groups manipulate their earnings, however, "compare mean test" indicates that earnings management in distress firms is more than healthy firms and also distress firms prefer to use more real activity earnings management than accrual earnings management before financial distress occurrence. Results also show that the level of earnings management is not being increased significantly in distress firms as financial distress occurrence is more closing. Granger test results show that earnings management tools reciprocally affect each other.

Keywords

Main Subjects

References

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Empirical Research in Accounting
Volume 8, Issue 4 - Serial Number 30
January 2019
Pages 345-362

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History

  • Receive Date: 18 April 2017
  • Revise Date: 18 April 2018
  • Accept Date: 24 June 2017

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