Impacts of managers’ loss-aversion characteristics on discretionary accruals-based earnings management in companies listed on the Tehran stocks exchange

Abstract

The present article investigates the impacts of managers’ loss-aversion characteristics on discretionary accruals-based earnings management in the Tehran Stocks Exchange companies. The study falls under applied research, which uses a descriptive-correlational method in terms of goals. The statistical population consists of all companies listed on the Tehran Stocks Exchange, which, in 2019, totaled 435 companies. The screening sampling method (systematic removal method) selects the statistical sample. Thus, the number of 138 companies are selected. To gather data on managers’ loss-aversion bias, the Pen Pin Questionnaire (2008) is employed, which, the loss-aversion bias, was introduced to the model as a virtual variable (0, 1). The adjusted Jones’ model is used to measure discretionary accruals-based earnings management. Variables of financial leverage, return on assets, corporate size, institutional ownership, and the market-to-book value entered the model as effective control variables to explain and examine the effects of the independent variable on the dependent variable. Excel and Eviews software and cross-sectional data model are used to analyze the data. The findings suggest that the variable of managers’ loss-aversion bias is positively and significantly associated with discretionary accruals-based earnings management.