International E-publication: Publish Projects, Dissertation, Theses, Books, Souvenir, Conference Proceeding with ISBN.  International E-Bulletin: Information/News regarding: Academics and Research

Studying the Impact of Prior Years Adjustments on Earnings Persistence

    ,

Author Affiliations

  • 1Department of Accounting, Shahroud Branch, Islamic Azad University, Shahroud, IRAN
  • 2Dept. of Business Administration, Strategic Management Concentration, Farabi Institute of Higher Education, Alborz, IRAN

Res. J. Recent Sci., Volume 4, Issue (11), Pages 42-45, November,2 (2015)

Abstract

The present research discusses the relationship between prior years adjustments of financial statements and performance sustainability of the companies listed in Tehran Stock Exchange. Profit margin ratio was used to measure performance sustainability and the difference between reported earnings and restated earnings was used to measure figure restatement value. The statistical sample includes 80 companies, which were members of Tehran Stock Exchange during 2008 - 2012. Simple and multiple regression techniques were used to implement the applied statistical pattern. In this research, we realized that when debit ratio is included in the model as a control variable, a significant relationship is established between absolute value of restatement and performance sustainability so that there is a positive relationship between earnings factor and financial consistency. That is, with the accounting changes increasing, performance sustainability increases, but with the debit ratio increasing, financial performance sustainability decreases.

References

  1. Moore D.L., Forecasting earnings management:Evidence from GAO restatement data, Doctoral Dissertation, Touro University International, (2007)
  2. Xia W., Accounting Restatements: A Comparison between China and USA, Journal of Modern Accounting and Auditing,2(10), 1116-1121 (2006)
  3. Kordestani GH.R., Azad A. and Kazemi M, Experimental Test of Importance of Prior Years Adjustment in Capital Market, Accounting Research,8(2), 1-20 (2010)
  4. Kevin W.H., Earnings Persistence of Restating Firms, Should All Earnings Restatements Be Treated Equally, (2008)
  5. Bahar Moghaddam M and Dolatabadi M., A Comparative Study between Quality of Reported Earnings and Restated Earnings, Journal of Accounting and Auditing Research,14(2), 23-29 (2011)
  6. Hashemi S.A., Hosseini S.M. and Barandan S., Comparing IncrementalInformation Content, Cash Ratios and Gearing Ratios to Evaluate Financial Performance of Companies Using Data Mining Approach, Journal of Financial Accounting Research,2(2), 92-98 (2012)
  7. Ben Chin-Fook Y., A Longitudinal and Cross-Industry Study on the Stability of Financial Ratios of Malaysian Companies University, Tun Abdul Razak, Malaysia, (2013)
  8. Chen Ma and Junrui Z., Research on Impact of Financial Restatement on Firm Value in Chinese Listed Firms, Available at SSRN 1870971, (2011)
  9. Abdoli M.R. and Darabi, Studying Cultural Backgrounds of Accountants’ Behavior and their Influence on Accounting Errors, (2009)
  10. Asadi GH.H. et al., Relationship between Capital Structure and Ownership Structure, Journal of Accounting Knowledge,4(2), 25-32 (2010)
  11. Nikbakht M.R. and Rafiei A., Formulation of the Factors Effective in Financial Restatements in Iran, Journal of Accounting Knowledge,2(3), 74-87 (2012)
  12. Kazemi H., Financial Statements and Factors and Reactions toward Them, Knowledge of Accounting Research,7(24), 128-141 (2011)