M.A. Thesis:

Underinvestment adjustment effect on the relationship between Earnings Management and Value Relevance of Accounting Information

In recent years, the relationship between the value of accounting information has been increasingly taken into consideration by researchers. The value relevance of financial statements can be measured by the reaction in market prices when the accounting figures are published. It is obvious that, however, the value relevance of accounting information is the ability to confirm or change the expectations of investors from the value of the company. If the company's shares are traded among investors, the market price of those stocks should outline the public's expectations of investors. The paper aims to study the underinvestment adjustment effect on the relationship between earnings management and value relevance of accounting information based on evidence of capital market. The paper is applied research and the method is descriptive and post-event type (using past information) using case study of firms listed in the Tehran Stock Exchange (TSE). The hypothesis testing was performed using multiple regression based on the collected data during 2009-2016 using R statistical software. At %5 error rate, the results showed that: There is no meaningful relationship between earnings management and the value relevance of accounting information. Furthermore, underinvestment does not mediates the relationship between earnings management and the value relevance of accounting information.

Keywords: : Underinvestment adjustment effect, earnings management, value relevance of accounting information