Investor Sentiment and Accounting Earnings Management

Behavioral finance perspectives state that investor sentiment affects stock price. Managers being aware of behavioral finance effects on stock price are expected to be more careful in their decision for earnings management. The sample consists of 475 observation (firm- year) in the period from 2010 to 2015 and the aim is to examine the relation between investor sentiment and accounting earnings management. To measure the investor sentiment and accounting earnings management, Shamsoddini (2015) and kaznic (1991) models are used respectively. The results show a significant positive relation of the momentum effect and value premium (price/earnings) variables to accounting earnings management. As a result, investors' short-term attitudes affect the extent of accruals manipulation. However, there is no significant relation between the investor sentiment and real earnings management.