The Effect of Free Cash Flows on the Evidence of Earnings Management in Enterprises Listed on the Tehran Stock Exchange
Journal Title: International Research Journal of Applied and Basic Sciences - Year 2016, Vol 10, Issue 5
Abstract
Today, investors, creditors and managers search for timely and reliable indicator to measure the shareholders’ wealth and the value of the enterprise. Among these indicators can cite to free cash flows. Free cash flows are important scale for evaluating the enterprise’s financial health and they are motivation for adjusting earnings management. Therefore, the main aim of this paper is to examine the effect of free cash flows on evidence of earnings management in enterprises listed on the Tehran Stock Exchange during the years 2009 to 2014. The sample of study consists of 117 enterprises that were selected by systematic elimination from the mentioned community. Using parametric regression methods, the results of the study state that there is a direct significant relationship between free cash flows and earnings management in enterprises with low growth, but no relationship was found between free cash flows and earnings management in enterprises with high growth. This means that managers of these enterprises tend to increase free cash flows and ultimately the value of the enterprise by the use of earning management tools.
Authors and Affiliations
Zahra Farahani| Department of Accounting, Hamadan Branch, Islamic Azad University, Hamadan, Iran, Mohammad Ghorban Mehri| Master of Accounting, Department of Accounting, Hamadan Branch, Islamic Azad University, Hamadan, Iran, Mohammad Reza Karimi Pooya| Master and head of Accounting Department, Hamadan Branch, Islamic Azad University, Hamadan, Iran
Keywords
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