Investigating the Using Methods of Management Discretion in Future Profitability Reporting and the Effect of Firm's Characteristics on Using Methods of These Discretions.

The purpose of this study is to investigate the using methods of management discretions in future profitability reporting of companies listed on the Tehran Stock Exchange (TSE). Accordingly, we investigate the type of earnings management in these companies in terms of opportunistic or efficient earnings management. In addition, in this research we investigate the effect of five characteristics including firm size, deviance in operating activities, predict of future profits growth, debts contracts and growth of sales on the type of earnings management in companies listed on the TSE. For this purpose, we develop and test six hypotheses in four different modes by using multiple regressions. The results of testing first hypothesis show that managers of stock companies use of own discretions to communicate private information about firm’s future profitability, and this is in accordance with definition of efficient earnings management. Also, results of the second to sixth hypothesis tests indicate that the in some of four different modes, efficient earnings management has a positive and significant relationship with deviance in firm operating activities.