Relationship between opportunistic behavioural of managers and earnings quality: Tehran Stock Exchange evidence

ABSTRACT: In this study an attempt has been made to the relationship between financial leverage, institutional ownership, and free cash flow as criteria of opportunistic behaviour of managers using accrual amount of earnings quality are examined, because managers can participate in free cash flow activities for the benefit of non-profit or personal use.The sample for this study is included firms listed on the Tehran Stock Exchange. The sample period is from 2005–2010 and to analyze data we use fixed effects regression model and Pearson coefficient. Our principal sources of information are annual financial statements, TadbirPardaz software and Stock Exchange sites. After applying some criteria, the sample size is 167 companies for each year.Our results showed that opportunistic behaviour of managers is not as an indicator of earnings quality, and managers of companies listed on the Tehran Stock Exchange are free to take opportunistic behaviour to maximize their interests or, managers may invest in non-profitable activities.