Environmental Uncertainty, Earnings Management and Stock Returns (The Moderating Impact of Managers' Ability)

Document Type : Original Article

Authors
S. Mohammadreza Raiiszade 1
Javad Ramezani 2
1 Assistant Professor of Accounting, Islamic Azad University, Chalus Branch (Corresponding Author)
2 Assistant Professor of Accounting, Islamic Azad University, Qaemshahr Branch
Abstract
in this research, first we discuss the relationship between environmental uncertainty (Calculated using the coefficient of variation of sales and Variability predicted earnings per share) With earnings management and stock returns and then we discuss whether the managers' ability on this relationship is effective or not. We selected 119 companies of in Tehran's Stock Exchange market in the period from 1390 to 1394 and our hypothesis were tested by using Correlation and multivariate regression methods. according to the results, Managers decided to use the earnings management when they face to the environmental uncertainty, in order to reduce earnings volatility. Also the market understands the customer's environmental uncertainty (Coefficient of Variation Sales) and react to them (This type of uncertainty has the information content) but does not react to the environmental uncertainty caused by uncertainty of managers about earnings per share. Finally, our result showed that the managers' ability of the example companies doesn’t have significant effect on the relationship between environmental uncertainty with earnings management and stock returns.
 
 
Keywords
environmental uncertainty
managers' ability
earnings management
Stock Returns
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