The Impact of Transactions with Affiliated Individuals on the Manipulation of Actual Activities, with Emphasis on the Role of Regulatory Corporate Governance

The purpose of this research is to investigate the impact of transactions with affiliated individuals on the manipulation of real activities, as well as to examine the moderating role of corporate governance mechanisms on the relationship between transactions with affiliated individuals and real earnings management. In line with the research objectives, a sample of 130 companies from among the listed companies in Tehran Stock Exchange during the period of 2007 to 2016 was selected and analyzed through regression models using panel data. In general, the findings show that transactions with affiliated individuals have a positive and significant impact on the management of real earnings, in other words, with the increase of transactions with affiliated individuals, real earnings management also increases. The results also show that the independence of the board of directors, institutional ownership and management ownership weaken the positive relationship between transactions with affiliated individuals and real earnings management. Regarding the effect of the size of board of directors and the CEO’s duality on the relationship between transactions with affiliated Individuals and real earnings management, there were no statistically significant results.