The Investigation of the Relationship between The Earnings Management of Group (Consolidated) Companies and the Stock Return of the Parent Company Listed in Tehran Stock Exchange

The main goal of this study is the investigation of the relationship between the earnings management of group (consolidated) companies and the stock return of the listed parent company in TSE. On the other hand, this study answers this question that whether investors, analysts and other users of accounting information understand earnings management of group (consolidated) companies and use it for their decision or not. As regards, capital market reaction to the published information will ultimately be reflected in the stocks yield, so the relationship between earnings management of group (consolidated) companies and the stock return of parent company for 45 statistical samples during the period 2004 to 2010 were investigated and to measure of the earnings management of group (consolidated) companies we used adjusted Jones model (1995). Total accrual contains discretionary & nondiscretionary accruals and the stock return of the parent company are used as research variables. Research hypotheses were analyzed by using of correlation and determination coefficient. Findings show that there is a weak inverse relationship (-0.291) but significant between earnings management of group (consolidated) companies and the stock return of the listed parent company in TSE.