The Effect of Over-valuation Stock Price on Real Earnings Management in Listed Companies of Tehran Stock Exchange

Document Type : Research Paper

Authors

1 Isfahan University

2 Institute of Higher Steel Higher Education

Abstract

The concept of overvaluation is the market price of share higher than its intrinsic value. Financial and accounting literature indicates that the managers of overvalued firms use the real earnings management to maintain this position. The aim of this study is to investigate the effect of over-valuation stock prices on real earnings managemen. Target sample consists of 80 companies during 1383-1391. Following Badertscher (2011), proxies of real earnings management are including of abnormal operating cash flows, abnormal production costs and abnormal discretionary expenses. Also, the ratio of the market price to intrinsic value is considered as a proxy of stock over-valuation، Residual income model was used to measure the intrinsic value، Panel data method was applied to examine the effect of over-valuation on real earnings management. Results indicate that the over-valuation has significant effect on abnormal operating cash flows, abnormal discretionary expenses and abnormal production costs as the proxies of real earnings management. In other words, these results can be deduced that firms with higher value of shares are expected tendency to sustain high performance and earnings management.

Keywords

Main Subjects

References

[1]   بهارمقدم، مهدی؛ حسنی‌فرد، حبیبه. (1389). بررسی رابطه بین رویدادهای مالی واقعی ومدیریت سود درشرکت‌های پذیرفته شده در بورس اوراق بهادارتهران،تحقیقات حسابداری، 6. 24-1.
[2]   پاکیزه، کامران؛ بشیری‌جویباری، مهدی. (1392). تأثیر ارزشیابی نادرست بر تصمیم‌های سرمایه‌گذاری شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران. فصلنامه مدیریت دارایی و تامین مالی، 3، 98-81.
[3]     ثقفی، علی. (1390). نقش گزارشگری مالی در همگرایی قیمت و ارزش ذاتی.فصلنامه بورس اوراق بهادار، 13، 4: 253-280.
[4]     شیرین‌بخش، شمس‌الله؛ حسن‌خوانساری، زهرا. (1384). کاربردEviewsدر اقتصاد سنجی. انتشارات پژوهشکده امور اقتصادی.
[5]   قربانی، سعید؛ جوان، علی اکبر، ناظمی، مهدی. (1390). تأثیر مدیریت واقعی سود بر جریان‌های نقدی عملیاتی آتی.پژوهش‌های تجربی حسابداری مالی،1: 150 – 134.
[6]     گجراتی، دامودار. (1386). مبانی اقتصاد سنجی. ترجمه حمید ابریشمی. انتشارات دانشگاه تهران، چاپ چهارم.
[7]   مرادزاده فرد، مهدی؛ عدیلی، مجتبی. (1389). بررسی رابطه بین دستکاری فعالیت‌های واقعی و هزینه حقوق صاحبان سهام در شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران.فصلنامه عملی ـ پژوهشی بورس اوراق بهادار، 7: 54-35.
[8]     مرادی، جواد؛ محمودی، لیدا. (1390). واگرایی قیمت و ارزش ذاتی سهام و بازدهی مورد انتظار. فصلنامه مدیریت، 21: 13-1.
[9]   Badertscher, B.A. (2011).Overvaluation and the Choice of Alternative Earnings Management Mechanisms. The Accounting Review,. 86,.5,.1491-1518.
[10]       Barton, J., and G. Waymire. (2004). Investor Protection under Unregulated Financial Reporting. Journal ofAccounting and Economics,.38,. 117–128.
[11]       Chi, J., and M. Gupta. (2009). Overvaluation and Earnings Management. Journal of Banking and Finance,.33(9),.1652–1663.
[12]       Cohen, D., A. Dey, and T. Lys. (2008). Real and Accrual Based Earnings Management in the Pre and Post Sarbanes Oxley Periods. The Accounting Review,. 83,. 757-787.
[13]       Dechow, P., S. Richardson, and I. Tuna. (2000). Are Benchmark Beaters Doing Anything Wrong? Working paper, University of Michigan.
[14]       Dechow, P.M., Skinner, D.J. (2000). Earnings Management: Reconciling the Views of Accounting Academics, Practitioners and Regulators. Accounting Horizons,. 14,. 235-250.
[15]       Fudenberg, D. and J. Tirole. (1995). A Theory of Income and Dividend Smoothing Based on Incumbency Rents. Journal of Political Economy,. 103,. 75-93.
[16]       Frankel, R. and Lee, C. M. (1998). Accounting Valuation, Market Expectation and Cross-Sectional Stock Return. Journal of Accounting and Economics,.25,.283-319.
[17]       Graham, J., C. Harvey, and S. Rajgopal. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics,. 40,. 3,. 3-73.
[18]       Graham, J., Harvey, C., S, Rajgopal. (2006). Value Destruction and Financial Reporting Decisions. Journal of Financial Analysts,. 27-39.
[19]       Healy, P., and J. Wahlen. (1999). A Review of the Earnings Management Literature and its Implications for Standard Setting. Accounting Horizons,. 17,. 365-38.
[20]       Jensen, M. (2005).Agency Cost of Overvalued Equity. Financial Management,. 34,. 5-19.
[21]       Lee, C., Myers, J. and B, Swaminathan. (1999).What is the Intrinsic Value of Dow? Journal of Finance,.54,.1693-1741.
[22]       Roll, R. (1986).The Hubris Hypothesis of Corporate Takeovers. Journal of Business,. 59,. 197-216.
[23]       Roychowdhury, S. (2006). Earnings Management through Real Activities Manipulation. Journal of Accounting and Economics,. 42,. 335-370.
[24]       Song, S. Tan, J. and Yi, Y. (2014). IPO Initial Returns in China: Underpricing or Overvaluation? China Journal of Accounting Research,. 7,.1,. 31-49.
[25]       Schipper, k (1989). Commentary on Earning Management, Accounting. Accounting Horizons,.3, 91-102.
[26]       Tate, G., and U, Malmendier. (2005). CEO Overconfidence and Corporate Investment. Journal of Finance, 60, 2661-2700.
[27]       Wang, H., W,Du. (2012). Overvaluation, Financial Opacity and Crash Risk. Available at http://ssrn.com.
[28]       Yang, K. and Anand M. V. (2013). Are Small Firms Less Vulnerable to Overpriced Stock Offers? Journal of Financial Economics,. 110,.1,. 61-86.
[29]       Zhang, W.(2008).Real Activities Manipulation to Meet Analysts, Cash Flow Forecasts. University of Texas at Dallas.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Journal of Asset Management and Financing
Volume 3, Issue 3 - Serial Number 3
December 2015
Pages 49-66

Files

Share

How to cite

Statistics