Analying Profit Manipulation with Emphasis on the Role of Non-Executive Managers and Risk Management of Stock Price Falls Following Benford’s Law in the Iranian Stock Market

Despite the increase in the level of awareness and general knowledge of the beneficiaries of financial affairs, the main issue in investing decisions is the high reliance on accounting report numbers (especially accounting profit as one of the main performance appraisal criteria) that creates many motivations for managers to manipulate (manage) these numbers in their favor. This study is an attempt to examine the extent of profit manipulation by considering the role of non-executive managers and the risk of stock price falls using Benford’s law and financial information of 1248 years of the listed companies during the years 2013-2020  in Tehran Stock Exchange. The results showed that the profit (loss) rate of the companies at risk of falling stock prices do not comply with Benford's law. However, the profit (loss) rate of companies without the risk of falling stock prices follow this law. The results also indicated that in companies with the risk of falling stock prices, differences with Benford's law were lower in cases where  the present proportion of non-executive managers was higher.