A study on the effect of leverage on firms’ management opportunism behavior

This paper presents an empirical investigation to study the relationship between the opportunism behavior and leverage. In this study, opportunism behavior is calculated based on discretionary accruals using the method proposed by Jones [Jones, J. J. (1991). Earnings management during import relief investigations. Journal of accounting research, 29(2), 193-228.]. In addition, the proposed study uses return on assets, return on equities, financial burden and financing for investigation. Using statistical data from Tehran Stock Exchange over the period 2006-2011, the study applies linear regression model and the results have indicated a positive and meaningful relationship between leverage and discretionary accruals, which is also called earnings management.