Effects of Earnings Management on Disclosure and True Financial Performance

This paper reviews impacts of earnings management on disclosure extent and true financial performance. This Research shows that the net disclosed earning is dependant to conditions such as a firm's information quality. The sample consists of 191 firms listed in Tehran Stock Exchange subject to increase of disclosure extent, over the period from 2010 to 2015. Findings reveal that there is a significant positive relation between disclosure quality and true financial performance of firms (measured by the adjusted assets return and equity return). The results show that a firm's disclosure is likely to result in benefits, but after an optimum level, increasing disclosure may decrease its true financial performance. This optimum level does not change when there are differences between firms' monitoring environments (e.g., independent board). These results indicate that intense monitoring of chief executive officers has no effect on the disclosure extent of a firm