A Study of Relationship Between Institutional Investors and Board of Director With Earnings Management

The corporate governance system has engaged in circumstance of manage and control of corporate, and especially the role of board of directors in this connection, and explains framework of an effective answering system. Corporate governance can be cause decrease of earnings management (decrease of discretionary accrual). Two basic mechanism of corporate governance system are: 1) institutional investors and 2) Board of directors. In this article we will engage in relationship between these two mechanisms with earnings management. In this research, we examined the relationship between institutional investors and board of directors with Earnings management in the companies accepted in the Tehran stock exchange. In the way of this goal, 75 accepted companies in the Tehran stock exchange had been chosen during 2004-2007. In this research, we adopt discretionary accrual measure of earnings management. Statistic results showed that there is a significant relation between institutional ownership, managerial share ownership and the number of outside directors with earnings management. That is, increase institutional ownership, managerial share ownership and the number of outside directors can be cause decrease of earnings management.