Relationship between classification shifting and information asymmetry with emphasis on the role of disclosure quality, earnings forecasts frequency and audit quality
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

Relationship between classification shifting and information asymmetry with emphasis on the role of disclosure quality, earnings forecasts frequency and audit quality

Document Type : Original Article

Authors
1 Assistant prof. Accounting, Faculty of Humanities and Social Science, University of Kurdistan, Sanandaj, Iran
2 Associate prof. Accounting, Faculty of Humanities and Social Science, University of Kurdistan, Sanandaj, Iran
3 M.S. Accounting, Faculty of Humanities and Social Science, University of Kurdistan, Sanandaj, Iran
Abstract
In order to make best decision, investors need information about accounting earnings. Earnings management can lead to information asymmetry among shareholders. Classification shifting is a type of earnings management where items in the income statement are reclassified without changing the net income, misleading users of financial statements. The purpose of this study is to examine the relationship between classification shifting and information asymmetry, as well as the moderating role of disclosure quality, earnings forecasts frequency, and audit quality on this relationship. The research sample includes 117 companies listed on the Tehran Stock Exchange from 2011 to 2020. Multiple regression method was used to test the research hypotheses. The results shows that there is a relationship between classification shifting and information asymmetry, and that disclosure quality and earnings forecasts frequency weaken this relationship. Since this method is used by managers as a complement to other earnings management methods, there is a essential need to examine and understand the effects of this method alongside other earnings management techniques, which has rarely been addressed in domestic researches.
Keywords
Subjects

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