Business, Management and Accounting
3 years ago

Earnings Manipulation Rampant in Stock Market, Eroding Investor Trust

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Accounting and Auditing Research
Investigation the relationship between real earnings management and accounting earnings management from income smoothing perspective
Naser Partovi, Elham Abshirini

Paper Summary

The study looked at how companies manage their earnings to make them look smoother. They used cash flow from operations to measure real earnings management and discretionary accruals to measure accounting earnings management. The researchers studied 110 companies in the Tehran Stock Exchange from 2001 to 2008. The results showed that managers use both real and accounting earnings management at the same time to make their earnings look more consistent.