Political Connections, Family Ownership and Earnings Quality: Some Evidence from Iran

This research examining the relationship between political connections in board, family ownership and earnings quality with an emphasis on political economy perspective and agency theory at the firms listed in Tehran stock exchange (TSE) from the years 2012 to 2018. To achieve this Purpose, this study uses a sample (805 firm-years observations) including the firms listed to examine research hypothesis. Also, the multivariate panel data regression is used for testing the relationship between variables. To enhance the robustness of the empirical results, this study uses other proxies of earnings quality and it has seen the effect of inflation. The present study finds are consistent with the resulting of the studies on the theory of political economy and agency theory previous literature. The results of the study indicate that firms with politically connected in board, have a lower earnings quality than politically non-connected. Also, the results show that family-owned firms have a higher quality of earnings than non-family companies. Furthermore, the negative effect of political connections on earnings quality moderating by family ownership. This means that mitigates the costs of political connection and improves the quality of firm's earnings when existing family ownership.