Earnings Management and the Effect of Earnings Quality on Future Profitability of the Tehran Stock Exchange Bankrupt Firms

This study investigates how management Authority of bankrupt firms performs in reporting future profitability and earnings quality effect in Tehran Stock Exchange during 1385-1390. Discretionary accrual is considered as measure of earnings management. Also in this study, it is investigated the effect of accounting-based earnings attributes on future profitability separately: accruals quality, earnings persistence, earnings predictability, and earnings smoothness. The results of estimating unbalanced panel data technique for 55 firms subjected to bankruptcy of Altman's model show that the Bankrupt companies tend to be opportunistic earnings management. We also find that earnings management performs better than earnings quality in predicting future profitability.