Analysing the moderating effect of managerial ability on the relationship between earnings management and cost stickiness: A panel data approach

Gholamnia Roshan, Hamidreza; Nemat Nejat, Korosh; Kordi, Korosh

doi:10.22034/necsbm.2023.395990.1003

Analysing the moderating effect of managerial ability on the relationship between earnings management and cost stickiness: A panel data approach

Document Type : Original Article

Authors

Hamidreza Gholamnia Roshan ¹

Korosh Nemat Nejat ²

Korosh Kordi ³

¹ Department of Accounting, Islamic Azad University, Babol branch, Babol, Iran

² Ma in Development and Economic planning, Islamic Azad University, Firouzkouh branch, Iran

³ Ma in Accounting, Department of Accounting , Islamic Azad University, Babol branch, Babol, Iran

10.22034/necsbm.2023.395990.1003

Abstract

Managers are always trying to manipulate the reported profit amount in line with the specific goals they are pursuing. The main issue related to this article is why managers seek to manipulate profits, how do they manage profits and what are the consequences of such behavior? The asymmetric behavior of costs makes the managers of companies to manage profits when necessary to reduce their losses, which prevents the asymmetric behavior of costs. Managers of a company often face issues such as planning and control in commercial companies. In the planning stage, managers need information about the trend of costs to predict future costs. The purpose of this study is to investigate the effect of managers' ability on the relationship between profit management and cost stickiness. For this purpose, information about 137 companies admitted to Tehran Stock Exchange was collected in the period of 2016-2016. After performing statistical tests and choosing the fixed effects method, the model was estimated due to the problem of heterogeneity of variance with the GLS method. The results show that profit management has a positive and significant relationship with cost stickiness and weakens the ability to manage this relationship.

Keywords

Earnings management

costs stickiness

management ability

GLS methods