evidence on asset sales and income management: case of iran

this study empirically examines whether managers manipulate reported income through the timing of sales of long-lived assets and investments. several empirical implications of the income-smoothing and debt-equity hypothesis in the context of asset sales were tested. the findings are consistent with the timing of asset sales by managers so that the recognized accounting income from these sales smoothes intertemporal income changes and mitigates accounting-based restrictions in debt contracts. in conformance with the income-smoothing hypothesis, the findings show that income from asset sales is significantly higher for firms that exhibit decreases in annual income than for firms experiencing increases. in conformance with the debt-equity hypothesis, the evidence indicates that income from asset sales of high debt-equity firms significantly exceeds that of low debt-equity firms