Impact of Free Cash Flow on Real and Artificial Earnings Management

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NOBAKHT MARYAM; Baradaran Hassanzadeh Rasool

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Journal: THE IRANIAN ACCOUNTING AND AUDITING REVIEW Year:2017 | Volume:24 | Issue:3 Page(s): 421-440

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Information Journal Paper

Title

Impact of Free Cash Flow on Real and Artificial Earnings Management

Author(s)

NOBAKHT MARYAM | Baradaran Hassanzadeh Rasool | Issue Writer Certificate

Keywords

Artificial Earnings ManagementQ2

Financial LeverageQ2

Free Cash FlowsQ2

Real Earnings ManagementQ1

SizeQ1

Abstract

The purpose of this study is to examine the effect of free cash flow on the management of real and artificial earning in companies listed in the Tehran Stock Exchange during 2006 – 2016 by choosing 183 companies as sample. To test the hypotheses, multivariate linear regression with panel data has been used. In this study, Free Cash Flows and Real Earnings Management have been measured with two and three measures (earlier and latter measures respectively are Free Cash Flows to the firm and business, and abnormal operating cash flows, abnormal production costs, abnormal discretionary costs and Artificial Earnings Management though discretionary accruals). The results shows Free Cash Flows with above mentioned criteria has a positive and significant impact on the criteria of real and Artificial Earnings Management. That means with the increase in free cash flow, the irregular level of the criteria of Real Earnings Management and also the amount of accruals items are increased. Actually the managers of the companies with high free cash flow have a good severity of action in manage of earnings management. Thus, the opportunist behavior of managers with surplus amount of cash can be explained through Free Cash Flows theory.

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APA: Copy

NOBAKHT, MARYAM, & Baradaran Hassanzadeh, Rasool. (2017). Impact of Free Cash Flow on Real and Artificial Earnings Management. THE IRANIAN ACCOUNTING AND AUDITING REVIEW, 24(3 ), 421-440. SID. https://sid.ir/paper/8106/en

Vancouver: Copy

NOBAKHT MARYAM, Baradaran Hassanzadeh Rasool. Impact of Free Cash Flow on Real and Artificial Earnings Management. THE IRANIAN ACCOUNTING AND AUDITING REVIEW[Internet]. 2017;24(3 ):421-440. Available from: https://sid.ir/paper/8106/en

IEEE: Copy

MARYAM NOBAKHT, and Rasool Baradaran Hassanzadeh, “Impact of Free Cash Flow on Real and Artificial Earnings Management,” THE IRANIAN ACCOUNTING AND AUDITING REVIEW, vol. 24, no. 3 , pp. 421–440, 2017, [Online]. Available: https://sid.ir/paper/8106/en

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