The Study of the Effect of Profit Management and Auditing Quality on the Overinvestment in Tehran Security Exchange Market's Listed Companies

The investigation of the relationship of auditing quality and profit management with overinvestment forms the purpose of this research. 129 listed companies of Tehran Security Exchange Market (TSEM) are chosen as the statistical sample. Both optional accrual items and company size are used to measure profit management and auditing quality respectively. Multivariate regression model was used to test hypotheses and results showed that as optional accrual items increase, overinvestment increases as well, additionally, they confirmed the negative relationship between auditing quality and overinvestment. After the companies were grouped, the results showed that the least amount of non-optimal investment has been done in the companies which have had low accrual items and auditing quality while those companies having high accrual items and auditing quality attracted the most amount of non-optimal investment.