RELATIONSHIP BETWEEN EARNING MANAGEMENT AND LIQUID RATIOS: BIST 30 IMPLEMENTATION

Abstract

Investors who will invest in companies make investment decisions by looking at the financial statements of the companies. However, some companies mislead the investors who will make investments by showing the information required in these tables differently and increase the demand for stocks. These events led to earnings management and investors have focused on earning management. In this study we aim to determine the relationship between liquidity ratios. Since the financial structures of the banking and finance sectors in the BIST 30 index are different from the financial structures of production and trade enterprises, the banking and finance sector was excluded from the scope and the analysis was carried out with a total of 16 enterprises. The data obtained within the scope of the research were obtained from the Public Disclosure Platform (KAP). In determining the earnings management of the companies included in the analysis, the earnings management formulation calculated over cash flows was used. In terms of liquidity ratios showing short-term borrowing ratios, data on current ratio, liquidity (acid test ratio) and cash ratios are taken as basis. The linear regression analysis method was used to determine the relationship between the earnings management practices of the enterprises and the liquidity ratios. While analyzing the data, statistical package programs SPSS 22 and STATA 16 were used. According to the results obtained from the research, it has been observed that there is a positive relationship between earnings management and current ratio at the 1% significance level, and a negative relationship between earnings management and cash ratio. It has been determined that there is a negative and 5% significant relationship between the liquidity ratio and earnings management.