The purpose of this study is to investigating the Iranian managers’ incentives to smooth income using discretionary accruals. The investigated incentives are size, income tax rate, debts by total assets ratio (debt contracts), deviation in operating activities, and earnings variability. Regression analysis is used to test the relation between smoothing behavior and five factors hypothesized to affect smoothing behavior. In this research, we test hypothesizes by: 1) cross sectional data from 1380 to 1383, and 2) accumulated data from 1380 to 1383.
The results indicate that, Iranian managers' smooth incomes by using discretionary accruals, and income tax rate and deviation in operating activities are manager drivers to smooth income. Unlike western researcher’s findings, firm size, debts by total assets ratio (debt contracts) and earnings variability are not important drivers to income smoothing in the Tehran Stock Exchange.
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