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The Effect of Management Optimism and Pessimism on Earnings Management

    Authors

    • Hamed Rezazadeh 1
    • Asgar Pakmaram 2
    • Jamal Bahri Sales 3
    • Rasoul Abdi 4

    1 Ph.D. Student in Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran

    2 Associate Prof. of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran

    3 Assistant Prof. of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran

    4 Assistant Prof. of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran

,

Document Type : Research Paper

10.30479/jfak.2020.11758.2560
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Abstract

Purpose: Earnings forecasting by management is one of the tools for managers to interact with the market that will give companies the opportunity to influence market behavior. The purpose of this study is to investigate the effect of management optimism and pessimism on earnings management.
Method: This is a descriptive, correlational and post-event study. For this purpose, the data of 155 companies listed in Tehran stock exchange during 2006-2017 were studied. The relationship between variables was investigated using multivariate regression.
Results: Study findings revealed that optimistic managers tend to earnings management through revenues and accruals methods.
Conclusion: Over-management optimism leads to more optimistic forecasts and given that managers' forecasts are as a measure of stakeholder decision making; therefore, overly optimistic managers have more incentives to earnings management. Optimistic managers are always trying to hide information and negative news from investors and to accumulate them inside the company in the hope that their poor performance will be covered by better performance in the future. As a result, they may take steps to aggravate agency problems.
Contribution: Given that the present study for the first time in Iran has specifically examined the tendency of optimistic and pessimistic managers to earnings management, it is expected that the findings of the study, in addition to the development of the literature and its theories, will have a favorable impact on the decisions of managers and investors.
 

 
 

Keywords

  • Management Optimism And Pessimism
  • Management Earnings Forecasts
  • Earnings Management.                        
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    • Article View: 2,219
    • PDF Download: 2,143
Financial Accounting Knowledge
Volume 7, Issue 1 - Serial Number 24
May 2020
Pages 157-180
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How to cite
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  • Article View: 2,219
  • PDF Download: 2,143

APA

Rezazadeh, H. , Pakmaram, A. , Bahri Sales, J. and Abdi, R. (2020). The Effect of Management Optimism and Pessimism on Earnings Management. Financial Accounting Knowledge, 7(1), 157-180. doi: 10.30479/jfak.2020.11758.2560

MLA

Rezazadeh, H. , , Pakmaram, A. , , Bahri Sales, J. , and Abdi, R. . "The Effect of Management Optimism and Pessimism on Earnings Management", Financial Accounting Knowledge, 7, 1, 2020, 157-180. doi: 10.30479/jfak.2020.11758.2560

HARVARD

Rezazadeh, H., Pakmaram, A., Bahri Sales, J., Abdi, R. (2020). 'The Effect of Management Optimism and Pessimism on Earnings Management', Financial Accounting Knowledge, 7(1), pp. 157-180. doi: 10.30479/jfak.2020.11758.2560

CHICAGO

H. Rezazadeh , A. Pakmaram , J. Bahri Sales and R. Abdi, "The Effect of Management Optimism and Pessimism on Earnings Management," Financial Accounting Knowledge, 7 1 (2020): 157-180, doi: 10.30479/jfak.2020.11758.2560

VANCOUVER

Rezazadeh, H., Pakmaram, A., Bahri Sales, J., Abdi, R. The Effect of Management Optimism and Pessimism on Earnings Management. Financial Accounting Knowledge, 2020; 7(1): 157-180. doi: 10.30479/jfak.2020.11758.2560

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