Earnings quality and type of earnings management in non-stressed and stressed companies

This paper examines the relationship between earnings management and earnings quality in two countries (93 companies from Tehran Stock Exchange and 92 companies from Saudi Arabia Stock Exchange) for the period (2013-2022 Tehran) and (2014-2023 Saudi Arabia). The data were collected as a year -firm and analyzed using multiple regression. The earnings quality was measured through three separate attributes (earnings predictability, earnings smoothness and relevance of earnings). To achieve the research goals, three hypotheses were developed and, in each hypothesis, the moderating role of one of the earnings quality indicators for each category of non-stressed and distressed companies were studied. The results of the research showed that in all cases of measuring the earnings quality, the earnings management in distressed and non-distressed firms are efficient. Similarly, earnings quality of earnings predictability type in the Tehran Stock Exchange and the earnings quality of relevance type in the Saudi Stock Exchange and the distressed firms, the earnings quality of relevance type in the Tehran Stock Exchange and the earnings quality of earnings smoothness type in the Saudi Stock Exchange can explain future profitability. Moreover, for the first time, the emphasis on the relationship between the attributes of the earnings quality and the type of earnings management and future profitability is introduced globally, especially in Saudi Arabia and Iran. By using international data, the comparison between the approach of Saudi Arabia and the approach of Iran will be done.