The purpose of the article is to investigate the interaction between the behavior of managers and investors toward Iran’s capital market and the focus on agency theory which ends up with the conflict between the utilities of manages and investors because a conflict of interest implies an attempt to spread opportunistic behavior. In the current study, the benefit of reducing capital cost (manager’s utility) and return on assets (investor’s utility) are considered variables of interest of either party, in that Osborne’s game theory was used in a two-step manner. The study population consisted of the companies listed on the Tehran Stock Exchange and Iran Over-the-Counter Market, classified in the game table according to managers’ behavior toward high or low earnings management and investor’s behavior toward acceptance non-acceptance of stock. The experimental results presented in this paper uphold the agency theory, indicating a conflict between managers and investors in Iran’s capital market, particularly in the Tehran Stock Exchange. According to game theory, Nash’s dominant equilibrium comes to the fore when dealing with the manager’s low earnings management and investor’s choice of strategy to accept a share in Iran’s capital market and Tehran Stock Exchange. Alternatively, the presentation of transparent financial statements and the acceptance of such a company stock can maximize parties’ utilities.

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