investigating the Relationship between Total Accruals and Discretionary Accruals with Sales Growth, Firm's Growth and Firm's Performance in Quarterly Periods

rostaminia, Baraneh; Azimi Yancheshmeh, Majid; Farhadi, Maryam; Molaie, Mahnam

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year 14, Issue 53 (2022)

fa 2022, 14(53): 24-43

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investigating the Relationship between Total Accruals and Discretionary Accruals with Sales Growth, Firm's Growth and Firm's Performance in Quarterly Periods

Baraneh Rostaminia¹

, Majid Azimi Yancheshmeh ^*

², Maryam Farhadi²

, Mahnam Molaie³

1- UNIVERSITY
2- Department of Accounting, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran.
3- Department of Accounting, Najafabad Branch, Islamic Azad University, Najafabad, Iran.

Abstract: (2453 Views)

commonly used Jones-type discretionary accrual models applied in quarterly settings
sujested liniear Relationship between Total and discretionary Accruals and independent variables. In addition These models applied in quarterly settings do not adequately control for nondiscretionary accruals that naturally occur due to firm growth. We show that the relationship between quarterly accruals and sales growth (measured over a rolling four-quarter window) is non-linear. Failure to control for the effects of firm growth and performance on innate accruals leads to excessive Type I error rates in tests of earnings management.Growth and accruals are fundamentally related.
Our analysis shows that quarterly discretionary accrual models with return on assets (ROA) matching that have been used in much of the prior earnings management literature are considerably related in a non-linear manner with seasonally adjusted measures of sales growth and firm growth. Moreover, we show that seasonally adjusted sales
growth and MB are correlated with partitioning variables in past research that are deemed to give rise to earnings management.
. Thus we test and show that there is non-linear relationship between sales growth ، firm growth and performance and total Accruals and nondiscretionary accruals.

Article number: 2

Keywords: discretionary accruals, non-linear, Sale growth, Firm Performance, firm growth.

Full-Text [PDF 634 kb] (159 Downloads)

Type of Study: Applicable | Subject: Special

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rostaminia B, Azimi Yancheshmeh M, Farhadi M, Molaie M. investigating the Relationship between Total Accruals and Discretionary Accruals with Sales Growth, Firm's Growth and Firm's Performance in Quarterly Periods. fa 2022; 14 (53) : 2
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