Investigating the Relationship Between Increased Urban Crime and Earnings Management Considering the Moderating Role of Corporate Governance

Author
ameneh bazrafshan
Associate Professor of Accounting, Imam Reza International University,Mashhad ,iran (Corresponding Author)
Abstract
This study examines the question of what earnings management is like in companies located in areas with high urban crime rates and whether corporate governance can have a meaningful moderating role? Theoretically, there are competing analyses on how urban crime affects earnings management, and therefore, empirical investigation of this issue is necessary. On the one hand, companies located in areas with high crime rates may turn to accrual earnings management due to the sensitivity and operational supervision of regulatory agencies. On the other hand, in areas with high crime rates, the operational and logistical conditions for real earnings management are more prepared, and therefore companies may have a greater tendency to use real earnings management methods. In the present study, two concepts of accrual and real earnings management are used to measure earnings management. The time frame of the research is 2013-2023 and the sample of the research is 163 companies listed on the Tehran Stock Exchange. The findings indicate that there is a positive and significant relationship between urban crime and actual and accrued earnings management. In addition, in comparison, earnings management in companies located in areas with high urban crime rates is more of the accrual type of earnings management. However, the results of the research indicate that there is no significant effect of corporate governance on the direction or intensity of the relationship between urban crime and earnings management. Other findings of this research show that first, the main results of the research do not change under the influence of the basis of determining the location of the company (head office versus factory) and the time lag between the independent and dependent variables. Second, the urban crime rate has a spillover effect, meaning that urban crime also has a significant and positive effect on earnings management in neighboring areas. Overall, this research shows that paying attention to the social dimensions of local environments and creating effective policies to reduce crime rates can prevent inappropriate behavior and financial manipulation and contribute to financial stability and health.


Keywords
Urban crime
Earnings management
Corporate Governance
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Value and Behavioral Accounting
Volume 10, Issue 19
Summer 2025
Pages 247-279