A survey of the relationship between disclosure quality (on time and reliability) and accruals management in the financially distressed companies

Abstract

The purpose of this research is the investigation of relationship between disclosure quality and accruals management in the financially distressed companies. To operationalize the disclosure quality, disclosure score presented by stock market was used. Adjusted model of Jones (1991) was applied for separation of discretionary and nondiscretionary accruals. Charitou et al. model (2004) was used for measurement of bankruptcy risk and determined the financially distressed companies. 249 firms listed in Tehran Stock Exchange were used as sample study for 2003-2009 to test the hypotheses and determining the relation between disclosure quality and accruals management and Panel Data system was used for analysis. The results show that there is a positively significant association between the accruals management (discretionary accruals) and disclosure quality. Also, the relationship between disclosure quality and accruals management in financially distressed companies had significant difference with the relationship with financially non-distressed companies. The results of the study showed that by the increase of bankruptcy risk, the relation between disclosure quality and accruals management is not weak significantly.