Managerial Entrenchment and Earnings Management

Considering the amended rules and financial crises in recent years, shareholders and investors need higher scale and quality of reliable information to make better decisions. One of the most important information sources in capital markets is managers and their decisions, that means managers' performance and decision making can help investors to make better decisions. This research examines the effect of Managerial entrenchment on earnings management of firms listed in Tehran Stock Exchange. The sample consists of 98 firms listed in Tehran Stock Exchange during the years 2007 to 2016 and the hypotheses are tested using a multivariate regression model. Findings show that there is a significant negative relation between managerial entrenchment and accruals earnings management as well as real earnings management. It was also found that, managerial entrenchment has reverse effects on the relation between opportunistic incentives of earnings management and the firm value. In other words, managerial entrenchment leads managers to pursue long-term goals through investment in profitable projects and plans resulting in value growth, rather than short-term goals through earnings manipulation