Document Type : Original Article
Authors
1 Ph. D Accounting Associate Professor, Razi University, Kermanshah, Iran.
2 Ph. D Accounting Associate Professor, Razi University, Kermanshah, Iran
3 Corresponding Author, Accounting MSc Student Razi, University, Kermanshah, Iran.
Abstract
1- INTRODUCTION
The financial crisis of the last decade has impacted financial markets significantly and has led to a remarkable reduction in the financing through the issuance of shares by companies and financial institutions. Additionally, it has given rise to an increase in the amount of debt in capital structure of companies; therefore, many companies are unable to repay their debts during the of crisis, exposing companies to financial distress and opportunistic behaviors
2- THEORETICAL FRAMEWORK
With the occurrence of the global financial crisis, the price of metals, oil, and including the country's oil revenues will decrease, which will initially cause a budget deficit through the reduction of government revenues. With the decrease in government revenues, the amount of government expenditures decreases, and the result is a decrease in investment and a decrease in demand, and the creation of economic imbalances, including recession in the economy. that this effect on exporting companies is more tangible due to the reduction of the general level of prices in the world markets; As a result, warehousing costs and other costs in these companies increase and they face the problem of lack of liquidity; On the other hand, it lowers investors' expectations of the growth and profitability of these companies, which ultimately increases the possibility of not being able to repay the interest and principal of debts. As a result, capital gains in investment companies decrease and put the companies on the verge of financial helplessness. When companies are on the verge of financial helplessness, they may take profit management in order to deal with the crisis and not lose shareholders, in order to make their situation more stable. Also, the management can influence the company's profit through optional accrual items in ways such as early recognition of revenues or postponing the recognition of expenses. What draws the attention of experts to the quality of accruals as an indicator of the quality of profit; The information content of accrual items components, in other words, the separation of accrual items components can provide information about the company's performance, but the market reacts to this information slowly; Therefore, the components of accruals can be considered as an indicator for determining the improvement or deterioration of the company. The aim of this study is the investigation of the impact of the global economic crisis on financial distress, earning management, and the pricing of accruals of companies listed on the Tehran Stock Exchange.
3- METHODOLOGY
The multivariate regression model and combined data were used to analyze the data and test the hypotheses. In order to show the explanatory power of the variables and to evaluate their importance, paired t-test was used. To test these effects, 104 companies listed on the Tehran Stock Exchange during the period 2008 to 2020 were studied.
4- RESULTS & DISCUSSION
There is a significant difference between financial helplessness during the period of the global financial crisis and the period after it; therefore, it can be expected that the global financial crisis will expose companies to financial helplessness and even bankruptcy. There is a significant difference between profit management during the global financial crisis and the period after it; when a company is exposed to a financial crisis, the company's management is affected by reducing its rewards, changing management and losing its reputation. Companies to secure financing and attract investors by making the financial performance of companies attractive during the period of financial crises. , have enough motivation to hide the deteriorating performance of the company by resorting to accounting choices, and finally, there is a significant difference between the pricing of accruals during the global financial crisis period and the period after it; Therefore, during the period of the global financial crisis, managers who try to manage profits to hide the dire situation of the company, there is an incentive for them to do this through the manipulation of discretionary accruals that are part of the net profit.
5- CONCLUSIONS & SUGGESTIONS
The findings of this study indicate the impact of the global financial crisis on the financial performance of companies and put them on the verge of financial distress. This occurs due to the inability of financing and as well as the motivation of managers to hide the deteriorating performance of the company by taking measures such as earning management and the pricing of accruals increases. Therefore, during the period of the global financial crisis, managers who attempt to manage profits to hide the dire situation of the company, have the incentive to do so by manipulating discretionary accruals that are part of net profit; Because accruals provide information about the company's performance and because it is an indicator to determine the improvement or deterioration of the company, there is always the motivation to manipulate it within the framework of accounting principles through the time of recognition of revenues and expenses as a tool for managing profits by management.
Keywords
Main Subjects
References
Ahsan Habib, Md., & Borhan Uddin Bhuiyan, A. I. (2013). Financial distress, earnings management and market pricing of accruals during the global financial crisis. Managerial Finance, 39, 2, 155 – 180.
Assenso-Okofo, O; Ali, M.J., & Ahmed, K. (2020). The effects of global financial crisis on the relationship between CEO compensation and earnings management. International Journal of Accounting & Information Management, 28, 2, 389-408.
Ataei, O., & Aziznejad, S. (2008). Global financial crisis and its effects on Iran's economy. Unpublished Report of the Office of Economic Studies (Financial Markets Group), Islamic Consultative Assembly. (in Persian).
Camyabi, Y.; Esfandiar, M., & Seyed Morteza, N. (2014). Investigating the Impact of the Global Financial Crisis on the Liquidity Ratios of Accepted Companies in Tehran Stock Exchange. Eleventh National Accounting Conference of Iran, Mashhad, Ferdowsi University of Mashhad. (in Persian).
Ebrahimi, K. A.; & Zakeri, H. (2009). Investigating earnings management using asset sales. Accounting and Auditing Research (Accounting Research), 1(3), 122-135. (in Persian).
Eyzadi Niyai, M. F., & Khazaye, A. (2014). Financial helplessness as a factor for the occurrence of profit management, Financial Management Strategy Quarterly, 3, 3, 47-25. (in Persian)
Francis, J.; LaFond, R.; Olsson, P.,& Schipper, K. (2005). The market pricing of accruals quality. Journal of Accounting and Economics. 39, 295–327.
- rod Erfani., & Bijan, Vasigh. (2018). The Impact of the Global Financial Crisis on Profitability of the Banking Industry: A Comparative Analysis. Economies 2018, 6, 66.
Gilson, S. (1989). Management turnover and financial distress. Journal of Financial Economics. 25, 2, 241-62.
Gordon, H. G. (1971). A Stochastic Cash Balance Model with Two Sources of Short-Term Funds. International Economic Review, 12, 250-256.
Green, E. R., & Lovata, L. (2013). The relationship between firms, characteristics in the periods prior to bankruptcy filing and bankruptcy outcome. accounting and finance reseach. l2, 1.
Gustaler, J.M., & amase, R.J. (1998). Credit rationing and financial disorder. Journal of Finance, 39, 1359-82.
Hassanzadeh, A., & Kianvand, M. (2009). The financial crisis, the global oil market and the OPEC strategy. Recent Economics, 126, 84-91. (in Persian).
Healy, P. M., & J. M. Wahlen. (1999). A Review of the Earnings Management Literature and Its Implications for Standard Setting. Accounting Horizons. 13, 365–383.
Izidinia, M. F., & Khaza'i. (2015). Financial distress as a factor for managing profit. Quarterly Journal of Financial Management Strategy, 3, 3, 25-47. (in Persian).
Kamyabi, Y.; Malekian, E., & Nabavian, S. M. (2014). Investigating the impact of the global financial crisis on the liquidity ratios of companies listed on the Tehran Stock Exchange, the 11th National Accounting Conference of Iran, Mashhad, Ferdowsi University of Mashhad. (in Persian).
Kasznik R. (1999). On The Association Between Voluntary Disclosure And Earnings Management. Journal Of Accounting Research, 37, 57-81.
Khairollahi, F., & Behshoor, B. (2014). Analytical Survey on the Fraud Consequences, the Global Crisis with Emphasis on Fair Value. Indian Journal Of Scientific Research,12(1).327-333. (in Persian).
Kindleberger, C.P. (1987). Manias, Panics and Crashes, A History of Financial Crises. New York, Basic Books.
Kurd Zanganeh, Nahid et al., (2020). Investigating and comparing the impact of the global financial crisis on the economy of Iran and Turkey using: the application of the (DSGE) method. Scientific Quarterly Journal of Applied Economic Studies of Iran, 9, 35, 177-217. (in Persian).
Kurdistani et al. (2014). Examining the qualitative characteristics of profits and the type of management in helpless and bankrupt companies. Quarterly journal of accounting research, 3, 4, 79-124. (in Persian).
Kyriakou, M.I. (2022). The effect of the financial crisis on audit quality: European evidence. International Journal of Accounting & Information Management, 30,1, 143-158.
Liberty, S., & Zimmerman, J. (1986). Labor union contract negotiations and accounting choice. The Accounting Review, 61, 4, 692-712.
Maleki, M.; Sina Kh., & Mansour, M. (2016). The Relationship between Corporate Growth and Optional Accruals Pricing in Small and Medium Enterprises. the seventh International Conference on Economics and Management, Sweden-Dalarna, ICOAC University of Communication, Dalarna State University. (in Persian).
Miranda-Lopez, J., & Valdovinos-Hernandez, I. (2019). The impact of the global economic crisis of 2008 on earnings quality in Mexico. Journal of Accounting in Emerging Economies, 9,3, 407-421. https://doi.org/10.1108/JAEE-08-2016-0071
Mohajeri, P. (2009). The effect of the 2008 financial crisis on crude oil prices and the global oil market structure. Graduate Thesis of Allameh Tabatabai University. (in Persian).
Mousavi, S.; Pishvai, M., & Khalatbari. (2016). Evaluating profit management at different levels of conservatism and institutional investors using Ben Ford's law. Quarterly Journal of Accounting and Auditing, 23, 2, 213-234. (in Persian).
Nakashima. M., & Ziebart, D. (2015). Did Japanese- sox have an impact on earnings management and earnings quality? Managerial auditing journal, 30, 482-510.
Perols, J. L., & Lougee, B. A. (2011). The relation between earnings management and financial statement fraud. Advances in Accounting. 27(1), 39 – 53.
Persakis, A., & Iatridis, G.E. (2015). Earnings quality under global financial crisis: A global empirical investigation. Journal of Multinational Financial Management, 30, 1-35.
Pour zamani., & Pouyan Rad. (2012). The relationship between earnings management and financial failure of companies. Financial Knowledge Analysis of Securities, 5, 4, 77-88. (in Persian).
Quynh nga, N.; quoc, T., & hong, P. (2021). Foreign ownership, state ownership and cash holdings under the global financial crisis: evidence from the emerging market of Vietnam. International Journal of Emerging Markets, 1746-8809.
Rahnemay Rodposhti, F.; Niko Maram, H., & Shahr Dani. (2006). Financial and strategic management (value creation). Tehran, Kasa publishing house. (in Persian).
Rashid Beigi, N. (2011). The Effect of Financial Crises on Managing Risk Management in Sepah Bank, Ilam Province. Master's Degree, Azad University, Kermanshah Branch. (in Persin).
Sadeghi, H.; Rahimi, P., & Salmani, Y. (2014). Effect of macroeconomic and governance factors on financial distress in Tehran's stock exchange. Quarterly Journal of Monetary Economics, 21, 8. (in Persin).
Sohaili, K.; Bari, S., & Behshor, E. (2017). The effect of the global financial crisis on the financial leverage of companies listed on the Tehran Stock Exchange. Accounting and Social Interests, 7, 1-16. (in Persian).
Tari vardi, Y.; Moradzadeh Fard, M., & Rostami, M. (2013). The impact of earnings management on the accuracy of forecasting future operating cash flows, Financial Accounting and Auditing Research, 6, 21, 141-172. (in Persian).
Timurid, M.; Hemmati, H., & Kazemi, O. (2014). Investigating the Relationship between Company Growth and Valuation of Optional Accruals, Master's Thesis. Non-Profit Institute of Raja Ghazvin, Faculty of Accounting and Management. (in Persian).
)
Send comment about this article