The effect of corporative leverage on earnings management in Drug industry

Abstract

In order to mislead shareholders, the directors often manage the profit. In this survey, the impact of corporative leverage on earnings management explored. The research sample includes 313 firm-years, which had been admitted in Drug industry in Tehran Security and Exchange Organization (TSEO). The period of research implementation was selected among fiscal years 2001-2014. To measure earnings management based on accruals in this investigation, jones’s was used, and to measure corporative financial leverage, total corporative liabilities have been divided by total corporate assets and properties. We found a negative relationship among financial leverage and earnings management in this research.

Keywords: Financial Leverage- Earnings Management-Drug industry