Purpose This study aims to examine the relationship between corporate governance (CG) and various measures of earnings quality in listed companies on Tehran Stock Exchange (TSE). The theoretical intuition for prediction of any relationship between earnings quality and CG is based on the behavioral theory and the institutional settings in Iran. Design/methodology/approach This study used the data of 117 listed companies on the TSE for the period from 2005 to 2019. The authors use panel data regression as the main methodology, along with principal component analysis, t-test and rank-sum test. Findings This study finds that the CG has a positive association with earnings quality. More precisely, better CG mechanisms cause lower earnings smoothness, more predictable and persistent earnings, and higher levels of timeliness, conservatism and value relevance. The relationship between CG and earnings quality is statistically and economically significant for all models. Originality/value The findings further the understanding of the role of CG in improving earnings quality in an Islamic and emerging country. First, this study provides evidence on the relation between CG and earnings quality by focusing on the behavioral theory, which suggests that corporate decision-making is not only influenced by formal CG mechanisms, but also by informal CG arrangements. In this case, this study departs from the restrictive theories (specifically, agency theory) that are widely used in past literature. Second, this study constructs an index that fits to corporate context of Iran rather than applying indexes introduced in Anglo-American environments.
PurposeThis study aims to examine the association between Iranian auditors' narcissism and the auditors' professional skepticism.Design/methodology/approachThe authors' sample is comprised of 355 professional auditors working in the private and public sectors in Iranian firms in 2022. The authors use cross-sectional multivariate regression as the main methodology, along with the structural equation modeling (SEM) technique.FindingsThe authors find that a higher level of narcissism leads to a greater level of professional skepticism among auditors, which ultimately can enhance the quality of the audit process. The results provided via the robustness tests also supported this finding.Originality/valueThe authors' findings further the understanding of the role of narcissistic personality traits in improving professional skepticism among auditors of an Islamic and emerging country. In addition, audit firms and audit partners can also consider the findings of this study and enhance the effectiveness of audit processes by assigning appropriate employees with certain personalities to specific tasks.
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