Journal of Accounting and Management Vision

Journal of Accounting and Management Vision

The effect of financial leverage on profit management and the trade-off (balance) between discretionary accruals and real profit management

Document Type : Original Article

Authors
naser dadash 1
mohammad javad kermani habib abadi 2
1 Department of Accounting, Shahin Shahr Branch, Islamic Azad University, Shahin Shahr, Iran.
2 Master of Accounting, Shahin Shahr Branch, Islamic Azad University, Shahin Shahr, Iran.
Abstract
The purpose of this research is to investigate the effect of financial leverage on profit management and the trade-off (balance) between discretionary accruals and real profit management. In line with the purpose of the research, four hypotheses were developed. In order to test these four hypotheses using the systematic elimination method, a sample of 105 companies was selected from among the companies admitted to the Tehran Stock Exchange during the eight years between 1394 and 1401. To analyze the data and test the hypotheses, multivariate regression models were used using the combined data method. The results of the research showed that financial leverage has a positive effect on accrual profit management, real profit management and overall profit management. Also, the results showed that companies with high financial leverage use real earnings management more than accrual earnings management (they have a lower balance between discretionary accruals and real earnings management).
Keywords
Financial leverage
profit management
accrual profit management
real profit management

Subjects