The Rule of Law and Earning Management

One of the most tangible signs of information distortion is earnings management. Therefore, the study of the factors affecting it has changed from specific components of the company to general and institutional components. The rule of law, as one of the institutional variables that has an interdisciplinary structure and focuses on political, social and cultural issues, has also been used to explain economic and financial contexts. Therefore, the rule of law is important for the accounting profession, which is closely related to the economic and financial sectors of society. As a result, the aim is to study the relationship between the rule of law and earning management. In this study, data were analyzed 167 companies listed on Tehran Stock Exchange during the years 2006 to 2018 and the hypothesis was tested by separating industrial and political period. The results showed that the rule of law and earning management has a positive and significant relationship.The findings also suggest that the relationship between the rule of law and earning management has been stronger in companies operating in the political industry.While the change in the political period has not affected the relationship between the rule of law and earning management. The findings of this study show that the rule of law does not lead to less earning management.This may be addressed by weak law enforcement in areas such as investor protection, lack of transparency, and increased corruption, which require further studies. Contribution: This research can create a new research platform to use interdisciplinary concepts such as the rule of law in explaining financial and accounting issues.