Investigating the role of Managerial Short-termism on the re-presentation of financial statements with the moderating role of managers' financial incentives

Document Type : Original Article

Authors

1 Assistant Prof., Department of Accounting, Faculty of Economics Sciences and Administrative, University of Qom, Qom, Iran

2 Assistant Prof., Department of Management, University of Arak, Arak, Iran.

3 MA., Department of Accounting, Faculty of Economics Sciences and Administrative, University of Qom, Qom, Iran

Abstract

Objective: The purpose of the present research is to examine the effect of managerial myopia as one of the behavioral characteristics of managers on the intensity of financial statement restatements, with the moderating role of managers' financial incentives.
Methods: This research is applied and classified as quasi-experimental in the financial domain, with the statistical population comprising all companies listed on the Tehran Stock Exchange from 2018 to 2023. The sample consists of 125 companies selected based on specific criteria, including the end of the fiscal year in March, stability in operations, consistency in the fiscal year, accessibility to data, and the exclusion of holding, investment, financial intermediary, banking, and leasing companies.
Results: The findings indicate that the myopic behaviors of managers have a significant positive effect on the intensity of financial statement restatements for companies listed on the Tehran Stock Exchange. Furthermore, managers' financial incentives weaken the relationship between managerial myopic behaviors and the intensity of financial statement restatements.
Conclusion: The results of the study on the role of managerial myopia on the intensity of financial statement restatements suggest that myopia can lead to short-term and opaque decision-making in financial reporting. This issue increases the likelihood of restating financial statements and gives rise to problems stemming from a lack of
transparency. Additionally, managers' financial incentives can weaken this relationship. When managers are under pressure to achieve short-term financial goals, they may be more inclined to restate financial statements. However, if financial incentives are effectively managed and appropriate policies are in place, it can mitigate the negative impact of myopic behavior and facilitate enhanced transparency and accountability in financial reporting.
Innovation: This study investigates the impact of managerial short-termism on the restatement of financial statements in publicly traded companies, with a focus on the moderating role of managerial financial incentives. Given the existing research gap in the integration of these variables, this innovative study aims to fill the knowledge gap and offer new theoretical foundations in this domain. The research, with the objective of providing a more comprehensive elucidation of the drivers behind the restatement of financial statements, will contribute to a deeper understanding of managerial behavior and their financial incentives.

Keywords

References

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Journal of Finance and Corporate Sustainability
Volume 1, Issue 1 - Serial Number 1
August 2025
Pages 100-128

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History

  • Receive Date: 14 December 2024
  • Revise Date: 20 January 2025
  • Accept Date: 23 February 2025
  • First Publish Date: 23 August 2025
  • Publish Date: 23 August 2025

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