Economic Downturn and Earnings Management

In accounting literature, earnings management has been a considerable issue. Many variables influence earning management. The purpose of this study is to examine the relationship between economic downturn and earnings management.Statistical population of the research is listed companies in Tehran stock exchange between 2009 to 2014. In Statistical population, a sample of 115 companies is investigated to tests hypothesis.The study makes use of discretionary accruals as a proxy for earnings management. The modified Jones model is used to measure discretionary accruals. The ordinary least square method was used to test hypothesis. The findings of the study provide evidence that there is a direct and significant relationship between economic downturn and earnings management. In other words, in economic downturn, earnings management increases. Moreover, the results show that fluctuations of gross domestic product as a macroeconomic variable affect earnings management.