The Relationship between Earning Management andCapital Structure Journal Article

The Relationship between Earning Management and Capital Structure Receipt: 20, 9 , 2013 Acceptance: 2, 12 , 2013 Fraydoon Rahnamay Roodposhti Professor of Islamic Azad University, Science and Research Branch, Tehran Farhad Arabahmadi Faculty Member of Accounting, Shahrood University of Technology Aliasghar Arabahmadi Ph. D. Researchers in this area found many approaches to detect the earnings management; within these approaches are the discretionary accrual models which include the modified. earning management, capital structure, debt ratio, return on assets, return on equity, total assets 37 1- Introduction The one of the most important challenge faced by researchers as well as academician is that they are unable to fine study the component of earnings management accruals (Beneish, 2001). Earlier studies on earning management through real activities manipulation have focused mainly on investment activities, such as reductions in expenditures on research and development (Baber et al, 1991; Bushee, 1998; Bens et al, 2003). The Jones model (Jones, 1991) and the modified Jones model (Dechow, Sloan, & Sweeney, 1995) were created to try eliminate the discretionary element of the accruals, by taking into consideration changes in the economic environment (Beneish, 2001). This study investigates the extent to which the positive associations between alternative discretionary accrual measures and earnings management. Our findings suggest the tentative facts of earning management since we have applied the Tahir (2011) model in measuring the discretionary accruals, debt ratio to measure the capital structure and to measure the size of firm we take figure of total assets of firms.