The Impact of Corporate Political Connection on Earnings Management Sensitivity: GMM Approach

The purpose of this study is to investigate the Impact of corporate political connections on Earnings management sensitivity in the capital market. A total of 113 companies of Tehran Stock Exchange that were selected through systematic elimination sampling during 2009-2019 were examined. In order to measure the dependent variable of this study, namely the sensitivity of Earnings management, the sensitivity of accruals, the sensitivity of real items and the sensitivity of income items were used through the GMM approach. The results showed that political connection has a significant effect on the sensitivity of income items and the sensitivity of real items, but it does not have a significant effect on the sensitivity of accruals. Therefore, political connections can be used from these connections and on the other hand earnings management behaviors and reporting of reports should be avoid according to the compliance of stockholder political institutions with careful auditing and monitoring.