Investigating the asymmetric effects of macroeconomic variables on opportunistic behavior of managers

Document Type : Research Paper

Authors

1 Department of Accounting, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

2 Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran

Abstract

In general, macro-monetary and financial variables are among the factors that can affect the performance of companies. Exchange rates are one of the factors that affect the business relations of economic enterprises with the outside world. Exchange rate risk arises from changes in stock returns as a result of foreign exchange fluctuations. On the other hand, earnings management has always been a challenge for managers and investors, and in the meantime, most studies have focused on internal factors of earnings management and less on external variables, especially the impact of an important variable such as exchange rate. In this study, the asymmetric effects of exchange rate passage on earnings management of 131 companies listed on the Tehran Stock Exchange during the period 2008-2019 have been investigated using the generalized torque approach. Based on the results, positive currency shocks on SEM1 and SEM2 have a negative and statistically significant positive effect on SEM4 and negative shocks have a positive and significant effect on SEM3. While the degree of positive exchange rate shock passed only on SEM4 and the rate of positive exchange rate shock passed on SEM3 is greater than one, but in relation to other cases, the degree of the passage of the exchange rate is incomplete. Based on the results, the degree of exchange rate passage has asymmetric effects on earnings management depending on the type of currency shock and earnings management variable.

Keywords