Earning Management efficient contracting theory and its Role in Value Creation

There are two theories for Earning Management (opportunistic theory and efficient theory). The aim of this research is to find which of earning management theories will be applicable in listed companies in Tehran Stock Exchange. In other words، we are seeking to answer whether the earning management will increase or decrease the firm value? Therefore، based on the constraints، 198 listed companies were selected among various industries between 1385 and 1390. Independent variable is earning management، control variables are Size، OL، and the amount of independent variable for last year. Dependent variable is Firm value that is calculated by three criteria including ROE، Approximated Tobin''s Q، and ROIC. Earning management is calculated by discretionary accruals method. We analyzed our hypothesis with SPSS and Clementine. The results show that earning management in our sample companies is complied with efficient contracting theory. Also، we found that there is no relationship between earning management and ROE، but there is a positive and significant relationship between earning management and ROIC، as well as earning management and Tobin''s Q.