Income from Asset sales, Earnings Change, and Leverage

Due to the fact that assets are recorded at their historical value and they may include unrealized gains (losses), managers may manipulate earnings through the sale of these assets and provide financial information which is not accurate and reliable. The aim of this study is to investigate the relationship between income from asset sales, earnings change and leverage of companies listed on Tehran Stock Exchange. The population of this study consists of all companies listed on Tehran Stock Exchange and the sample includes 110 companies for a period of 12 years (2004-2015). Multivariate linear regression analysis is used to test the research hypotheses at the level of 5%. The results show that there is no significant relationship between income from asset sales and earnings change. Also, based on the research results, there is a significant relationship between income from asset sales and financial leverage. In other words, there is a positive relationship between income from asset sales and financial leverage.