Research paper

One of the primary goals of profit management is to maintain the company's reputation because credit makes the company efficient and dynamic. Gaining a decent position among competitors and in the capital market causes investors and creditors to have a more favourable opinion of the company, preventing the company from spending more money competing with other similar companies and allowing it to obtain credit and loans at a lower cost. The most important motivator for profit smoothing is the assumption that companies with a good profit trend and earnings that do not fluctuate much are more valuable than similar companies. There are several factors that can affect the management of earnings in the company, one of which is the characteristics of the CEO. As a result, the purpose of this study is to look at the influence of board characteristics on earnings management in Tehran Stock Exchange companies. Board Experience, Board Power, Board Rights and Remuneration, Board Size, and Profit Management Independence are some of the variables examined in this study.

Yan-Yu Chou, Min-Lee Chan (2018), in a study entitled "Investigating the effect of board members' characteristics on earnings management in the organization", examined the impact of board characteristics on earnings management. According to their findings, shareholders and investors must identify and obtain information that explains stock returns; Lenders require a model to assist them in evaluating a customer's ability to repay principle and interest on loans and facilities; Investors, both natural and legal shareholders, require information in order to assess a company's performance and predicted profits; By establishing a benchmark for the performance of the incentive system for managers, they may inspire their motivational behaviour and produce long-term value in the company. The results of the research revealed a link between earnings management and directors' board characteristics such as board membership, audit committee participation, and amount of effort. The high remuneration of the directors' board has been demonstrated to raise the degree of profit management.

Klein et al. (2016) discovered a positive and significant positive relation between the percentage of family members' ownership and institutional ownership with earnings value in their research Corporate Governance, Ownership Structure, and Profit quality in Malaysia. However, there is no relationship between board members' independence and profit quality.

In a study titled the Relationship between Board Oversight and Earnings Management on whether or not non-executive board members affect unusual accruals, Peasnell, K; Pope, P; and Young, S (2015) found that the number of non-executive board members is inversely related to the likelihood of managing unusual accruals to avoid reporting losses or reducing profits The size of the company's board of directors was also examined by the researchers. A smaller board will have less bureaucracy and may be able to deliver more accurate financial reporting. There is evidence that a larger board of directors has less to do with a company's performance.

In their study, Yu (2014) found a nonlinear relationship between board members 'ownership percentage and earnings quality and a positive relationship between independent managers' ratio and earnings quality. They also found that there was no relationship between the number of board members and the level of profit quality.

Velury et al. (2006) examined the relationship between corporate governance and profit quality and concluded that regardless of the ability (strength or weakness) of corporate governance, the reporting/profit quality is higher for companies that in the past than existing competitors have overtaken the industry. Also, the quality of reporting/profit for such companies is higher after controlling the power of the corporate governance system.

In research published in 2019, Scott (2019) looked at the link between ownership structure and capital structure for firms that are traded on Jordanian Stock Market. His findings revealed that capital structure and institutional investors do not have a negative or substantial link. They claim that the development of institutional investors as capital owners is one of the external control mechanisms impacting corporate governance. Institutional investors keep a close eye on the company by gathering information, implicitly pricing management choices, and controlling the company's performance. Furthermore, according to their findings, liquidity, asset size, and asset structure have a positive and significant association with the debt of Jordanian companies, whereas profitability has a negative and significant relationship with the debt of Jordanian companies.

Safaei (2017) investigated the impact of organisational governance on profitability and managerial accounting in Tehran Stock Market listed firms in a study titled The Effect of Corporate Governance on Earnings Management and Tax Management in Listed Companies on the Tehran Stock Market. This article investigates the connections between company governance, earnings management, and tax management. For this reason, certain important corporate governance factors such as board size, board independence, and board member remuneration have been explored, as well as profit management using Jones' modified model and tax management using established effective tax rate guidelines. Accounting as well as present usage. This topic was researched utilising data from 110 companies that were listed on the Tehran Stock Exchange between 2008 and 2012. The assumptions were tested using a multivariate regression model using merged data using the least-squares approach. The findings show that none of the corporate governance measures (such as board size, independence, and compensation) had a substantial impact on earnings management. On the other hand, the size of the corporate governance directors' board has had a substantial impact on tax management indicators such as the definitive effective tax rate and the effective tax accounting rate. However, none of the corporate governance measures has had a major impact on the effective current tax rate. In general, increasing (decreasing) board size leads to a decrease (increase) in the effective rate of definitive tax and accounting, and ultimately, tax management.

Financial reporting has a number of vital aims, one of which is to give helpful information for decision-making. Users of accounting information evaluate the profitability and forecast the future cash flows of the company based on the information reported in the financial statements, and then, by establishing a logical relationship between profitability and future cash flows, evaluate the company's value and make decisions based on this forecast. Investors and shareholders must be able to locate and obtain information that explains stock returns. Lenders want a model that will assist them in determining their ability to repay principle and interest on client loans and facilities. Investors, both natural and legal owners, require data in order to assess company performance and forecast projected returns. They must design an appropriate performance measure for the incentive system for managers in order to boost their motivated behaviour and produce long-term value in the organisation. The recent financial scandals for large U.S. corporations are the result of fictitious accounting. These scandals have had a significant influence on that country's financial institutions, as well as other nations' financial markets. In fictitious accounting, the reporter presents a false and arbitrary perception of managers by the company without violating the principles, standards, and accounting standards, and only by relying on the absence of standards, tax laws, and financial regulations in the field of conducting a financial event. Accounting standards no matter how firmly and fundamentally set, leave room for manoeuvring so that accountants can adhere to such standards, and financial regulation does not apply their spirit in practise due to the influence of stakeholders through lobbying and other methods of advancing their goals. As a result, accounting standards creators are perpetually behind their consumers in terms of advancement (Gunny, 2005). Profit management is one of the subjects that has risen in the financial markets in recent decades, which researchers and professionals have investigated and explored from a variety of perspectives, and everyone has looked at the explanation and interpretation of this issue with their own suspicion. Earnings management is based on taking advantage of the flexibility of standard accounting methods and recognised principles. Other reasons for the existence of profit management include the many interpretations that might be derived from the methods of an accounting standard. This flexibility is the main reason for the variety of accounting methods. The integrity of the data reported in the financial statements is compromised when interpreting a standard with a lot of flexibility. Profit management can also be guided by compliance and conservative principles. Earnings management has gotten a lot of attention in the accounting world during the previous three decades. The interconnected global economy has created a new paradigm in the concept of firm value from the perspective of shareholders. Intangible assets and the new organisational model based on management strategy and value generation that shareholders assess to value the business unit have replaced tangible assets and liquidity as the major sources of company value (Rappaport, 1998). Profit management, in general, is the application of the company's management opinion on the precedence and latency of accounting for expenses and income or taking into account expenses or transferring them to later years so that the company can profit without major changes over several fiscal years. The presence of an adequate and effective governance structure in the country and economy may improve confidence and strengthen the market, lowering capital costs and allowing businesses to use resources more efficiently. Furthermore, the expansion of activities is encouraged (Hajian & Izadinia, 2011). The target shareholders, according to most nations' Commercial Codes and Company Laws, are the company's owners, and the directors should manage corporate resources on behalf of the shareholders in a way that enhances the shareholders' income. As the country's business divisions expand under the management of actual shareholders, they will be able to participate in the selection of board members and the CEO. The essential part of corporate governance, the board of directors' characteristics and structure, has a significant impact on the board's performance and, as a result, the business unit's success. The directors' board is formed in order to monitor the performance of the business unit and in order to protect the interests and interests of the shareholders. The stock market is critical for attracting people's little investments and funding companies. The stock market's popularity will bring economic growth to society since these markets play a positive role in the allocation of national resources and capital. The influence of the board of directors' attributes on profit management is examined in particular. The major issue that this study aims to address is whether or not the features of the directors' board have an impact on the profit management of firms listed on the Tehran Stock Exchange.

The following are some of the goals we would want to achieve with this research:

• Examining the impact of board features on earnings management in stock market corporations as a primary goal

Sub-objectives:

• Examining the influence of board experience on the management of earnings in stock market companies

• Examining the influence of board power on the management of earnings in stock market companies

• Examining the influence of board salaries and bonuses on earnings management in companies that list on the stock market.

The main question:

• Do the characteristics of the board of directors have an influence on the stock market earning management?

Sub-questions:

• Does the experience of the board of directors have an impact on the management of earnings in market companies?

• Does the size of a company's board of directors have an impact on earnings management?

• Is it possible to conduct effective research on the influence of board salaries and bonuses on earnings management in companies with stock market investors?

· Klein, A. (2002). Audit Committee, board of director characteristics, and Earnings Management. Journal of Accounting and Economics, 33(3), 375–400. https://doi.org/10.1016/s0165-4101(02)00059-9

· Peasnell, K. V., Pope, P. F., & Young, S. (2005). Board monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals? Journal of Business Finance Accounting, 32(7-8), 1311–1346. https://doi.org/10.1111/j.0306-686x.2005.00630.x