Individual Emotions and Earnings Management Behavior: A Test of the Theory of Positive-Psychology

Earnings management has attracted many accounting researchers. Recent empirical research has shown that earnings management behavior can have a behavioral and psychological origin. The purpose of this paper is to study the effect of positive and negative emotions on opportunistic and efficient earnings management. This is an applied research .The instrumentation for data collection includes Belski questionnaire (2008) to measure the individuals' desire for efficient earning management and Panas questionnaire(1988) to measure the positive and negative emotions of individuals. The statistical population consisted of graduate and Ph.D. students in Accounting and Financial Management in 2017, which was used to determine the sample size from the Cochran formula by assuming an unknown statistical society. Out of 300 distributed questionnaires, 225 valid questionnaires were received for analysis. To analyze the data obtained, multiple regressions were used.  The results of the research show that there is a significant relationship between positive emotion and efficient earnings management, as well as between negative emotion and opportunistic earnings management. However, there was no significant relationship between negative emotion and efficient earnings management and also between positive emotion and opportunistic earning management. In other words, positive emotions and feelings lead to positive financial decisions and increase the wealth of shareholders and vice versa, negative emotions lead to negative and inefficient financial decisions in to the personal interests of management