Examining the Effect of Discretionary Accrual's on Stock Liquidity of Companies Listed in TSE: A Comprehensive Index for Liquidity

Stock liquidity is one of the criterions that the investors consider in their portfolio decisions. There are some advantages in high levels of stock liquidity such as attracting short-term capitals and also increasing turnover in capital market. On the other hand, earnings management is a managerial activity influencing stock liquidity and includes discretionary related earnings management and real earnings management. Therefore the main purpose of this study is to estimate the effect of the discretionary accruals based earnings management on stock liquidity of companies listed in TSE. This study conducted through regression model based on panel data and then hypotheses examined through this. The results of data analysis and hypotheses examination indicated that the earnings management activities based on discretionary accruals significantly influence stock liquidity negatively. Control variables include standard deviation of daily stock returns, the average daily turnover of stocks, the average closing price of stocks traded, the average number of daily transactions of stocks, and market value of the firm. Based on the results, these variables have no significant effect on the dependent variable.