The Correlation between Corporate Governance Mechanisms and Earnings Quality in Listed Companies in Tehran Stock Exchange

In recent years corporate governance has been discussed as one of the effective strategies for increasing the quality of financial (earnings) reporting. Corporate governance refers to a set of relationships between shareholders, directors, and accountants of the company and it contains establishing a control system in order to reserve the rights of minority shareholders and proper implementation of assembly acts and preventing any possible abuse. The current research aim is to survey the correlation between corporate governance mechanisms and earnings management in listed companies of Tehran stock exchange. From the point of aim the current research is an applied research. In this research the amount of changes in one or a few factors based on the changes of one or a few other factors through correlation coefficient is considered. Also based on the category of researches due to the collecting data method (research design) this research is a descriptive research. Regarding the imposed conditions the sampling was conducted from 492 companies listed in stock exchange up to the end of 2012 and 98 companies were chosen as the sample. Required data were collected through corporates data collecting from their financial statements and Rahavard Noven software, and in order to analyze data and extract the descriptive and inferential statistics Eviews software was used. Results showed that there is a positive and significant correlation between the size of corporate auditor, amount of non-bound directors among the board of directors, and ownership percentage of institutional investors and the earnings quality, while there is a positive but insignificant correlation between the component of lack of CEO as the chairman or the vice-chairman of board of directors (CEO duality of responsibilities) and block number of major shareholders and earnings quality. At the end a few practical research suggestions are provided.