Examination the Effect of Investment Inefficiency and Financial Constraints on Earnings Management

چکیده مقاله

This research analyzed the effect of investment inefficiency and financial constraints on earnings management. Earnings management is measured based on Kothari et al (2005) model. Investment inefficiency is measured based on Fazzari et al (1988), Kaplan & Zingales (1997) and Linck et al (2013) models. Financial constraints is measured based on some criteria like net financial leverage, free cash flow, interest rate, dividend payout, operational cash flow, size and age; by using these criteria, sample firms divided to constraints firms and no constraints firms. Research sample include 260 firms listed in Tehran Stock Exchange over the period 2008-2014. Hypotheses are tested based on panel multivariate regression model; also it is used the mean comparison test to do supplementary analysis. The results showed a significant and positive relationship between investment inefficiency and earnings management. But there is no significant relationship between financial constraints and earnings management.

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