The Effect of Moral Hazard between Managers and Shareholders on Accrual and Real Earnings management with Emphasis on Corporate Governance Mechanisms

Document Type : Original Article

Authors
bahman abdigolzar 1
Younes Badavar Nahandi 2
Mehdi Zeynali 3
1 Ph.D. Candidate, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran
2 Associate Professor, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran,
3 Assistant Professor, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran,
Abstract
Abstract
Moral hazard arises as a result of factors such as delegated powers to managers and their motivation to use these powers for personal gain, without regard to the interests of shareholders. Earnings management occurs when, as a result of delegated authority, managers make judgments in financial reporting and transaction structure to change financial reports figures. Therefore, in order to investigate this issue, in the present study, the relationship between moral hazard between managers and shareholders with Earnings management based on accruals and Earnings management based on real activities was emphasized with emphasis on corporate governance mechanisms. The present study is applied in terms of purpose and descriptive-correlational in nature. Research data have been collected through financial statements, documents, and annual audited documents of companies in the period of 13 years from 2007 to 2019 from Tadbir Pardaz database and Rahavard Novin software. Findings showed that the moral hazard between managers and shareholders for real earnings management and accrual earnings management had a positive and significant effect. Regarding the effect of corporate governance in relation to the moral hazard between managers and shareholders with real earnings management and accrued earnings management, the results indicate a negative and significant effect. Therefore, moral hazard between managers and shareholders causes managers to be more willing to manage profits and corporate governance mechanisms cause control and ultimately weaken the management of real and accrued profits as a consequence of ethical risks.
Keywords
"Moral hazard between Managers and Shareholders"
"Earnings management Based on Accruals"
"Earnings management Based on Actual Activities"
" Corporate Governance"
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