Analysis Effect of Managers' Overconfidence and Tax Avoidance on the Quality of Financial Reporting Quality and Earnings Management in Listed Companies in Tehran Stock Exchange

Earnings is considered as one of the most basic and important items of financial statements in financial and economic decisions that are considered by many people. But sometimes managers, in order to maximize their benefits, may report earnings that are inconsistent with the public interest interests of users. Earnings management is the set of actions that managers take to streamline information to achieve specific goals. Financial reporting categorizes company-specific information from a management perspective and presents it meaningfully to users, and investors, potential lenders, and their advisors use it as a basis for decision-making on capital allocation. The main role of financial reporting is to effectively transfer information to outsiders in a credible and timely manner. Based on the above, the present study examines the relationship between managers' overconfidence and tax avoidance on the financial reporting quality and earnings management. In order to achieve the above objectives, four hypotheses were formulated. Therefore, in order to test the research hypothesis, a sample of 130 firms was selected from the firms listed in Tehran Stock Exchange during the period 2013 to 2019. Multivariate regression model based on combined data was used to test the research hypothesis. The results of this study show that there is a negative relationship between managers' overconfidence and tax avoidance on the financial reporting quality, which means that with increasing managers' overconfidence and tax avoidance, the financial reporting quality will decrease; In addition, there is a positive and significant relationship between managers' overconfidence and tax avoidance on earnings management, which means that with increasing managers' overconfidence and tax avoidance, earnings management will increase.