The Survey of the Impact of Stock liquidity and Earnings Management Based on Discretionary Accruals and the Actual Items

Managerial short-termism, or the desire to achieve a high stock price by inflating current earnings at the expense of long-term growth. In this study, the relationship between Stock liquidity and earning management is discussed. In this regard, to measure earning management were used two criteria discretionary accruals and the actual items through a reduction in discretionary spending. Sampling population of the present study includes 91 accepted companies at Tehran stock exchange and manufacturing parts in the time period of 2005 – 2014 and the method of panel-data have been used to analyzing. Based on the results of this study, the coefficient of stock liquidity is negative and significant. These results suggest that firms with higher levels of stock liquidity are less likely to manage their earnings. Actually, these findings provide that stock liquidity discourages opportunistic earnings management, thus mitigating managerial short-termism. Also, There may seem no relation between that stock liquidity and earnings management based on actual items.