The study of a relationship between information asymmetry and earnings management in mutual funds (short term and long term)

Mohammad Anvar Barfi, Mohammad Ghasemi

Abstract


The main purpose of this study is to investigate a relationship between information asymmetry and earnings management in mutual funds (short term and long term). Therefore, earnings management is determined as a dependent variable while the monitoring effect and information asymmetry are specified as independent variables. Concentration of ownership and the percentage of non-executive members of the board of directors are also specified as control variables of the research. In this survey, the method of collecting information includes library method and documents mining of financial statements of companies in the site of Tehran Stock Exchanges. The research statistical society consists of mutual funds (Tehran Stock Exchange) during 2010 -14. Since the number of investment funds are limited, so the census rule has been used and all the members of the statistical society have been selected as a statistical sample. The statistical sample size is 80 mutual funds. The research method is a descriptive-correlation one by a practical approach and the data analyzing method using panel data is including descriptive analyzing, the normality test, the correlation test and the multiple regression test. The study results indicated that the average of earnings management variable of sample companies was 0.2024 and its minimum and maximum values were -0.9936 and 2.9233, respectively. The study of skewness and kurtosis of the variable, that should be 0 and 3 respectively to encompass a normal distribution, indicated that the variable was not normally distributed. According to presented descriptive statistics, the average of the information asymmetry variable and the monitoring effect of sample companies during the period of the research have been positive and 0.2671, 0.3936, respectively. The numbers of observations in a descriptive statistics related to companies are 400 cases (80 funds during 5 years). According to descriptive statistics, the diffusion index of these variables is low in different companies. The highest and lowest standard deviations are respectively related to the monitoring effect and information asymmetry. Also, assumption test results showed each of the three hypotheses is approved and there is a positive and significant relationship between information asymmetry and degree of earnings management in mutual funds. The monitoring effect on earnings management in long term investment funds is stronger than short term ones and the monitoring effect on earnings management in long term investment funds is stronger when information asymmetry is low.


Keywords


monitoring effect, earnings management, mutual funds, information asymmetry.

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