Asian Journal of Research in Business Economics and Management
Year : 2014, Volume : 4, Issue : 11
First page : ( 230) Last page : ( 241)
Online ISSN : 2249-7307.
Article DOI : 10.5958/2249-7307.2014.00988.8

A Diagnostic for Earnings Management Using Changes in Asset Turnover and Profit Margin

Tavangar-Hamzehkolaei Afsaneh, Seifi Khaled*

Department of Accounting, College of Economics and Accounting, Islamic Azad University, Tehran center Branch, Tehran, Iran 

*Corresponding author

Abstract

The purpose of this study is investigating a diagnostic for earnings management using changes in asset turnover and profit margin in 133 listed firms in Tehran Stock Exchange has been in the period 2005 – 2011. Analysis data this study taken with using multivariate linear regression and using the combined data. The results revealed that, during the course of the study, a statistically significant difference between the mean upward earnings management in the company of the two models studied existed. Because difference between upward earnings management and abnormal accruals of the company, increase profit margins and reduce total asset turnover can not simultaneously be a sign of upward earnings management; moreover, Because difference between downward earnings management and abnormal accruals of the company, reduce profit margins and increase total asset turnover cant not simultaneously be a sign of downward earnings management. Due to the inability to model the marginal profit/total asset turnover in detecting earnings management (both upward and downward), it is proposes that the analysts and other participants in the Tehran Stock Exchange in line with diagnosis of management for corporate profits use the models of abnormal accruals and earnings management detecting models.

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Keywords

Earnings Management, Profit Margin, Asset Turnover.

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