Investigating the relationship between managers’ loss-aversion characteristics and non-discretionary accruals-based earnings management in companies listed on the Tehran stocks exchange

Abstract

The present article aimed to investigate the relationship between the managers’ loss-aversion characteristics and non-discretionary accruals-based earnings management in companies listed on the Tehran Stocks Exchange. The Pen Pin Questionnaire (2008) was employed to investigate the managers’ loss-aversion bias, which was introduced to the model as a virtual variable (0, 1). To measure non-discretionary accruals-based earnings management, the adjusted Jones’ model was used. Variables of financial leverage, return on assets, corporate size, institutional ownership and 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. A total of 137 companies listed on the Teran Stocks Exchange (from 2018 to 2019) were selected via systematic elimination method. The research variables were also analyzed by Excel and Eviews software as well as cross-sectional data model. The findings suggested that the variable of managers’ loss-aversion bias is not significantly associated with non-discretionary accruals-based earnings management, which nullifies the research hypothesis.