Investigating the Fundamental Effect of Real Profit Management on Stock Returns Emphasizing the Quality of the Audit

Abstract

One of the main factors in making fundamental changes in Iran's economic environment can be the generalization of ownership of enterprises, financing through public participation and the privatization of government sectors and enterprises. In this context, the transparency and optimal quality of financial information, which is the basis of the optimal economic decisions of investors, creditors and, in general, users of information, is of particular importance. We aimed to investigate the fundamental effect of real profits management on stock returns with an emphasis on the quality of audit auditing with 16 underlying hypotheses and using the information of 123 companies admitted to Tehran Stock Exchange during the years 2011-2015. The results showed a significant relationship between earnings management and stock returns. On the other hand, research showed that the entry of audit quality variables led to re-approval of the model.