International Journal of Management, Accounting and Economics
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Volume 5, No. 7, July 2018 Pages: 516 - 534
Effect of Information Asymmetry and Mutual Funds Ownership on Earnings Management in Companies Listed in Tehran Stock Exchange
Farhad Azizi
Corresponding author:
Azizi[dot]f7[at]gmail[dot]com
Abstract:
Managers smooth profits for any reasons. One of the core objectives in earnings management is to create a more stable flow in order to support higher level of interest payable. More stable profit flow may view as lower risk, which may lead to higher stock price and less cost of borrowing. Earnings management also focuses on enterprise management inclination to enhance investors’ expectation and to reduce firm’s risk. Due to increased profit stability and reduced fluctuations, investors may provide more accurate prediction on future profits. The present research studies the effect of information asymmetry and mutual funds ownership on earnings management among companies listed in Tehran Stock Exchange. Research statistical population included all mutual funds during 2011-2016. This is an applied study in term of purpose; and it is essentially a descriptive-correlation study. The present research analyzes earnings management through using Dechow and Dichev model. The model deals with the relationship between accruals and cash flows to measure earnings management. Research results showed that information asymmetry has no effect on earnings management. In addition, there is a significant relationship between funds classification and earnings management, which may influence earnings management. Research results may be applied for all listed companies, investors, and stock exchange.
Keywords:
Information asymmetry, earnings management, investment funds
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