Abstract:
However, the free cash flows scale is important for the financial health of the
company, but it has also its own limitations. Moreover, it’s not immune from
accounting tricks. Free cash flows can be considered as a measure of value for
shareholders of listed companies on Tehran Stock Exchange. The managers of
these companies have tended to use the earnings management for managing the
free cash flow and ultimately shareholder value and wealth. The main objective of
this study is to investigate the interactive effect of institutional ownership and
board independence on the relationship between excess free cash flow and earnings
management in the Tehran Stock Exchange. The study is applied and correlation
research by its objective and nature. The variables used in this study have
been extracted from the financial reports of listed companies in Tehran Stock
Exchange and the web page of Tehran Stock Exchange in the period of 2009 to
2015. The results suggest that, "institutional ownership" and "board independence"
on the relationship between "surplus free cash flow and earnings management"
had no significant effect.
Machine summary:
Impact of Institutional Ownership and Board Independence on the Relationship Between Excess Free Cash Flow and Earnings Management Allahkaram Salehi * a, Sajjad Mohammadi b, Marzieh Afshari b aDepartment of Accounting, Masjed-Soleiman Branch, Islamic Azad University, Masjed-Soleiman, Iran bDepartment of Accounting, Khoramshar-Persian Gulf International Branch, Islamic Azad University, Khoramshar, Iran.
The main objective of this study is to investigate the interactive effect of institutional ownership and board independence on the relationship between excess free cash flow and earn- ings management in the Tehran Stock Exchange.
The results suggest that, "institutional ownership" and "board independ- ence" on the relationship between "surplus free cash flow and earnings manage-ment" had no significant effect.
Considering the fact that managers tend to use management tool to manage profit, free cash flow and ultimately, value and wealth of shareholders, therefore, it created an incentive in au- thors to study the interactive effects of institutional ownership and board independence on the rela- tionship between excess free cash flow and earnings management in Tehran's Stock Exchange.
The significance of this study lies in the fact that it shows investors whether institutional ownership and board independence and their interactional effect on free cash flow and earning management can be influential on creating value in corporations.
3. 2 Internal Researches Mehrani & Bagheri [17] reviewed this matter in the article entitled “The effect of free cash flow and institutional shareholders on earnings management in listed companies in Tehran's Stock Exchange”.
According to the results obtained from the studied population, it also showed that there is no relationship among the components of corporate governance, institutional ownership and board independence with excess free cash flow.