The Effect of Firm Life Cycle on the Discretionary Accruals

Based on life cycle theory، firms have various characteristics in various stages of their life cycle. Since discretionary accruals are counted as a criterion for income smoothing، the main question in the present study is whether the firm life cycle has any effect on the amount at use of discretionary accruals. Using Anthony and Ramesh''s (1992) and Black''s (1998) method of classifying، the sample companies using indices for sales growth، change in capital expenditure and the firm age، growing، mature and declining stages were classified. Then using modified Jones model discretionary accruals were estimated. In the last stage، the hypotheses of the study were tested using pooled regression and Generalized Least Squares (GLS) method. The sample of this study is consisted of non-financial firms listed in Tehran Stock Exchange during the years 1384 to 1388. The findings showed that the rate of use of discretionary accruals is different at various stages of life cycle، so that، the rate of use of discretionary accruals at the grow stage is more compared with the mature and declining stages. This rate of use is less at the mature stage than the declining stage.