Feedback of Stock Price Information on the Earnings Management in Companies listed in Stock Exchange: Managerial Learning Hypothesis
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

Feedback of Stock Price Information on the Earnings Management in Companies listed in Stock Exchange: Managerial Learning Hypothesis

Document Type : Original Article

Authors
Mandana Taheri 1
GHOLAMREZA KARAMI 2
1 Assistant Professor, Faculty of management and accounting, Allameh Tabataba'i University, Tehran, Iran
2 Associate Professor, Faculty of management, University of Tehran, Tehran, Iran
10.22034/jse.2021.10659.0
Abstract
In efficient markets, the release of announcements and news is effective in stock prices and the price is valuable information. Hayek has defined price as the point where information has been gathered for decision or access to knowledge associated with the decision-making problem through the price. Based on this view, the hypothesis of efficient markets has been raised that it, flow of information from inside to outside company affects shareholders' decision making, but based on managerial learning hypothesis there are flow of information from outside to Inside Company, where managers learn about price information and this learning affects decision making and company management activities. In this paper, the effect of the price on the behavior of earnings management was investigated by reviewing 623 data from 89 firms listed in Stock Exchange for the period of 7 years from 2009 to 2015. The results show that the price is effective on the behavior of earning management and Its relation with profit management based on accruals is significant and  negative And with earnings management based on actual activities, significant and positive. Also, each per share, size, percentage of institutional stakeholder's concentration, asset returns and leverage ratio have been effective on the behavior of earning management.
Keywords
Managerial learning hypothesis
Accrual-based earnings management
earnings management based on actual activities
announcements
stock price
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Quarterly Journal of Securities Exchange
Volume 13, Issue 51
Autumn 2020
Pages 28-52