Accounting and various aspects of finance
Ghodratolla Barzegar; Mohsen Faghih
Abstract
A significant part of capital market research is stock price synchronicity and its influencing factors. When considering these factors, financial report readability and CEO media exposure emerge as critical elements in fostering a conducive environment for conveying understandable information to the ...
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A significant part of capital market research is stock price synchronicity and its influencing factors. When considering these factors, financial report readability and CEO media exposure emerge as critical elements in fostering a conducive environment for conveying understandable information to the market. Therefore, this study examines how CEO media exposure influences the relationship between financial report readability and stock price synchronicity. In this context, we analyzed data from 99 firms spanning the years 2014 to 2021. Our findings are rooted in the components of the information environment, encompassing both information supply and demand. To address the endogeneity of financial report readability, we employed the 2SLS method. Findings showed that the financial report readability led to a decrease in stock price synchronicity. This relation was more pronounced in firms whose managers had greater media exposure. Additional tests revealed that, on the information supply side, low institutional ownership, and on the information demand side, companies characterized by higher information asymmetry imply greater growth opportunities and more significant agency problems. Furthermore, the effect of CEO media exposure on the relationship between financial report readability and stock price synchronicity was found to be strengthening. These findings underscore the valuable roles played by financial report readability and CEO media exposure in enhancing information quality and reducing the impact of unsystematic factors on stock price movements.IntroductionOne area that has exacerbated the financial crisis on the capital market is the heightened sensitivity of stock prices to market and industry news relative to firm-specific information. In this regard, the phenomenon of stock price synchronicity has become a challenging keyword in economic, financial and accounting literature, especially in emerging markets.Wang (2014) considered it to have informativeness in the pricing process and compared it to a type of noise affecting both financial and non-financial decisions. Loughran and McDonald (2014) believe that the information environment plays a decisive role in creating and shaping stock price synchronicity. Therefore, this research aims to study the impact of financial reporting readability and CEO media exposure as components of the information environment and information communication tools on stock price synchronicity.Research QuestionsDoes the CEO media exposure influence the relationship between financial reporting readability and stock price synchronicity?Do components of an information environment (including information supply and demand) change the effect of CEO media exposure and financial reporting readability on stock price synchronicity?Literature Review2.1. Financial Report Readability and Stock Price SynchronicityBai et al. (2018) argued that when the cost of collecting and processing information is high, inexperienced investors may gather incomplete firm-specific information from stock price volatility and movements. They tend to rely on market or industry information, resulting in information inefficiency and risk within the market. On the other hand, when the financial reporting readability is high, the cost of processing and gathering information for investors is reduced by facilitating access, and stock returns synchronicity decreases.2.1. CEO Media Exposure, Financial Report Readability, Stock Price SynchronicityLiu and McConnell (2013) have stated that managers are more likely to abandon devaluation-based efforts after media criticism. They have argued that this effect can be attributed to negative media coverage regarding the imputation of shareholder value. Additionally, Cahan et al. (2020) have shown that CEO media exposure leads to an improvement in the quality of financial reporting because it exposes managers to the risk of lawsuits.MethodologyThe necessary data and information were gathered from the annual financial reports of firms listed on the stock exchange between 2014 and 2021, as well as from the Codal and RDIS databases. Additionally, the data related to stock price synchronicity was extracted from the database of the Financial Information Processing Center (Fipiran.com) at Tehran Securities Exchange Technology Management Co. Finally, 99 firms and 792 observations (year-firm) were screened and analyzed.ResultsThe findings showed that financial report readability led to a decrease in stock price synchronicity. This relationship was more pronounced in firms whose managers had greater media exposure. Additional tests revealed that on the information supply side, low institutional ownership, and on the information demand side, companies with higher information asymmetry represent more growth opportunities and greater agency problems. Additionally, the effect of CEO media exposure on the relationship between financial reporting readability and stock price synchronicity was strengthened.DiscussionThe findings showed that the improvement of the readability index causes the weight of firm-specific information on the stock price to exceed that of market and industrial information, leading to a reduction in the phenomenon of stock price synchronicity. Additionally, CEO media exposure has strengthened the relationship between financial report readability and stock price synchronicity. In other words, the readability of financial reporting in firms with higher media coverage has intensified the stock price synchronicity. The interpretation of these results is that managers use media tools to mark the quality of financial reporting and take steps towards reliable and useful information due to the risks that the media may create for them. Therefore, the CEO media exposure can be considered as one of the new tools and mechanisms of information sources in the emerging market of Iran, which has informational content. Robust tests also demonstrated that, in terms of information supply, firms with a low percentage of institutional shareholders, and in terms of information demand, firms with higher growth opportunities and greater agency problems observed a more pronounced effect of CEO media exposure on the relationship between readability and stock price synchronicity. Based on these results, institutional shareholders can be considered as a tool for supplying and transmitting information to the market. Also, the growth opportunities and representation problems can also be counted among the factors that affect the demand for information.ConclusionThese findings reiterate the beneficial role of financial report readability and CEO media exposure as examples of information quality, reducing the influence of unsystematic factors on stock price movements.
Accounting and various aspects of finance
Mehdi Nikravesh
Abstract
This study examines the effect of firms’ chief executive officers’ overconfidence on their firms’ profitability and the predictability of this profitability. The study tests hypotheses regarding the significant positive impact of chief executive officers' overconfidence on profitability ...
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This study examines the effect of firms’ chief executive officers’ overconfidence on their firms’ profitability and the predictability of this profitability. The study tests hypotheses regarding the significant positive impact of chief executive officers' overconfidence on profitability and its predictability. This is accomplished using the Generalized Method of Moments regression analyses on data from 257 CEOs of firms listed on the Tehran Securities Exchange over a sixteen-year period. The initial results indicate positive impacts of overconfidence on firms’ profitability and the predictability of future profitability. The robustness of the findings was tested by altering the profitability measures from return on assets (ROA) and return on equity (ROE) to Tobin's Q, as well as by changing the proxy for managerial overconfidence. These checks emphasize the role of overconfidence in the examined context. These findings support the positive roles of employing overconfident managers in the firms. By contributing to the limited body of literature on the positive effects of managers’ overconfidence, the findings can be used by investors, analysts, and other users of the results to consider overconfidence in their analyses of profitability and its predictability.Keywords: Managerial Overconfidence, Profitability, Predictability Of Future Profitability, Behavioral Approach IntroductionManagerial overconfidence, the individual tendency to be optimistic about the firm’s future and their power over it (Skala, 2008; Hribar and Yang, 2016), is one of the most significant biases studied in finance and accounting literature. Prior research has shown the negative role of this behavioral bias on firms’ finance and financial reporting features such as dividend payment (Deshmukh et al., 2013; Mashayekh & Behzadpur, 2014), finance policies (Malmendier & Tate, 2005; Malmendier & Tate, 2008), financial restatement (Presley & Abbott, 2013; Shekarkhah et al., 2019), and management earnings forecasts (Mehrani & Taheri, 2015; Hribar and Yang, 2016; Sheri Anaghiz et al., 2019). While numerous studies have focused on the negative impact of managerial overconfidence, there are relatively few that have explored the positive aspect of the bias. One of the positive impacts of overconfidence may include the improvement of firms’ profitability and its predictability (Kim et al., 2022).Because of their optimistic viewpoint regarding future firm performance, overconfident managers often invest in R&D and creative activities, potentially resulting in higher profits for their firms (Galasso & Simcoe, 2011; Hirshleifer et al., 2012; Xia et al., 2023). These activities may have long-term outcomes, including profitability. Consequently, the performance of firms managed by overconfident chief executive officers tends to be more positive compared to other firms. Moreover, due to the long-term investments made by overconfident CEOs, the future profitability of their firms is often higher compared to those managed by not-overconfident managers. Therefore, the predictability of future performance tends to be higher in firms that have overconfident managers (Kim et al., 2022). These theoretical predictions require empirical testing, and this paper conducts such an examination in an emerging market context, specifically the Tehran Securities Exchange.Several important reasons exist for studying the effects of firms' chief executive officers' overconfidence on their firms' profitability and the predictability of this profitability. First, this study heightens the understanding of economic decision-makers regarding the potential impacts of overconfidence, which is useful for perceiving its economic outcomes in firms. Second, it can reveal the role of bias in an emerging market. Third, this research employs dynamic panel data analyses to test the hypotheses, as some prior studies have shown a serial correlation between dependent variables, including profitability and predictability (McNamara & Duncan, 1995; Mashayekhi & Mennati, 2012; Kim et al., 2022), which has been overlooked in previous research concerning the role of overconfidence in profitability and its predictability. Fourth, as suggested by Kim et al (2022), there is less evidence about the positive impacts of overconfidence compared to its negative effects. This paper contributes to the literature by presenting evidence about the positive role of managerial overconfidence. Literature ReviewOverconfident managers usually possess a positive outlook on their abilities and they tend to forecast the future optimistically (Heaton, 2002; Hribar and Yang, 2016). This viewpoint often leads to overinvestment, especially in R&D and creative activities (Galasso & Simcoe, 2011; Hirshleifer et al., 2012). Therefore, there is a higher probability of achieving greater profitability in firms managed by overconfident managers. Based on this, the first hypothesis is developed as follows.H1: Managerial overconfidence has a significant positive impact on firms’ profitability.Overinvestment in firms led by overconfident CEOs is often long-term. By creating competitive advantages through these investments, these firms can experience continuous profits (Kim et al., 2022). Therefore, these profits can be more predictable than the profits of firms managed by non-overconfident managers. This expectation can be formulated into a hypothesis as follows.H2: Managerial overconfidence has a significant positive impact on the predictability of firms’ profitability. MethodologyThe study’s hypotheses were tested using Generalized Method of Moments regression analyses on data from 257 CEOs of firms listed on the Tehran Securities Exchange over a sixteen-year period (2007-2022). Initial analyses were conducted using the study’s main proxy for managerial overconfidence, as introduced by Sheri anaghiz et al. (2019). Return on Assets (ROA) and Return on Equity(ROE) are two main proxies for measuring profitability. Additional analyses, as the robustness checks, examined the hypotheses by changing the measure of overconfidence to overinvestment proxy introduced by Schrand & Zechman (2012) and changing the measures of profitability to Tobin’s Q. To assess predictability, I used the correlation between present and future profitability changes. I tested the hypotheses using two regression models that included control variable such as financial leverage, firm size, sales growth, earnings growth, growth opportunities, earnings volatility, discretionary accruals, and lagged dependent variables. ResultsThe primary results indicated positive impacts of overconfidence, as measured by the main proxy, on firms’ profitability and predictability of future profitability, as indicated by proxies such as Return on Assets and Return on Equity. The robustness checks, which involved changing the profitability measures from these proxies to Tobin’s Q, showed the significant effects of managerial overconfidence on profitability and its predictability. Further robustness checks, which involved changing the managerial overconfidence proxy to an overinvestment proxy, emphasized the role of overconfidence in the examined context. Overall, the findings support the hypotheses of the research. DiscussionThe results showed the significant role of CEOs’ overconfidence in generating profits and improving their predictability. These findings highlight the importance of the behavioral approach in explaining the positive effects of CEOs’ cognitive bias on organizational performance. These findings are consistent with previous studies by Hirshleifer et al. (2012), Zavertiaeva et al. (2018), Alberts (2018), and Kim et al. (2022), which also support the idea that employing overconfident CEOs can benefit firms. ConclusionThis paper highlights the significance of managerial overconfidence in shaping firms’ profitability and its predictability. The findings shed light on one of the most important reasons why overconfident managers are hired in firms and how their presence can impact the predictability of financial performance. These results can be valuable for investors when making decisions about firms and for analysts when analyzing both present and future financial performance. The main limitation of the paper is that the sample did not include the financial firms such as banks, insurance companies, and investment firms.AcknowledgmentsI thank my family for their continued support. Managerial overconfidence, the individual tendency to be optimistic about the firm’s future and their power over it (Skala, 2008; Hribar and Yang, 2016), is one of the most significant biases studied in finance and accounting literature. Prior research has shown the negative role of this behavioral bias on firms’ finance and financial reporting features such as dividend payment (Deshmukh et al., 2013; Mashayekh & Behzadpur, 2014), finance policies (Malmendier & Tate, 2005; Malmendier & Tate, 2008), financial restatement (Presley & Abbott, 2013; Shekarkhah et al., 2019), and management earnings forecasts (Mehrani & Taheri, 2015; Hribar and Yang, 2016; Sheri Anaghiz et al., 2019). While numerous studies have focused on the negative impact of managerial overconfidence, there are relatively few that have explored the positive aspect of the bias. One of the positive impacts of overconfidence may include the improvement of firms’ profitability and its predictability (Kim et al., 2022).
Financial Accounting
Abbas Aflatooni; Kefsan mansouri; Zahra Nikbakht
Abstract
The accounting information quality and its relationship with financing decision-making is one of the important issues that attract interest from researchers. However, the way accounting information quality affects financing costs during the COVID-19 pandemic is a topic that has not been explored in domestic ...
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The accounting information quality and its relationship with financing decision-making is one of the important issues that attract interest from researchers. However, the way accounting information quality affects financing costs during the COVID-19 pandemic is a topic that has not been explored in domestic research. The purpose of this research is to investigate the effect of the accounting information quality on the cost of debt and to explore how this effect mainfested during the pandemic of COVID-19. In this regard, the data from 137 firms listed on Tehran Stock Exchange for 2012-2022 (1057 firm-years) have been analyzed. The generalized least squares (GLS) approach was employed to fit the models and fixed effects for years and industries were also controlled. The research results for the entire period demonstrate that an increase in accruals quality (as a proxy for accounting information quality) leads to the cost of financing through debts and this decrease is more pronounced for innate accruals quality than for discretionary accruals quality. Furthermore, the findings suggest that during the period of the COVID-19 pandemic, the impact of accruals quality and its innate and discretionary components on the cost of debt diminished. The results of the robustness tests using decile-ranked values of accruals quality support the main findings.IntroductionThe global pandemic of COVID-19 and the economic recession related to it brought many challenges to companies in most countries (Barai & Dhar, 2021). Due to the widespread effects of this disease and the various and costly measures taken by countries to control this pandemic, during the outbreak of COVID-19, the economic activities of companies faced a serious challenge (Aljughaiman et al., 2023). COVID-19 had a significant negative impact on the employment level of the workforce, reduced economic activity, and created high levels of uncertainty in many financial markets (Zhang et al., 2020). These conditions have most likely hurt the accounting information quality (Pham et al., 2023; Chen et al., 2023) and due to the inverse relationship between the accounting information quality and the cost of debt, it has led to an increase in the cost of debt. However, most of the empirical evidence in this regard is related to developed countries such as the United States, the United Kingdom, and Australia, and the evidence on emerging markets (such as the Iranian capital market) is limited in this regard. Therefore, this study aims to investigate the relationship between the accruals quality and the cost of debt and to compare the extent of this relationship during the COVID-19 pandemic and other years.Literature ReviewIn accounting, accruals refer to a part of earnings that does not carry cash flow and is a product of the accrual accounting system. Therefore, accruals represent the difference between earnings and cash flows (Nallareddy et al., 2020). Since accruals are affected by managerial discretion, the accruals quality can be used to evaluate the accounting information quality and predict future cash flows (Le et al., 2021). The COVID-19 pandemic has significantly affected the global economy (Zhu & Song, 2021), involved many businesses in financial difficulties (Albitar et al., 2020) and intensified their dependence on resources provided by creditors and investors (Shen et al., 2020). Most likely, these conditions have affected the accounting information quality (Pham et al., 2023). During the COVID-19 pandemic, most companies have had enough motivation for earnings management (Lassoued & Khanchel, 2021). However, earnings management causes the financial information reported by companies to be inconsistent with their actual situation, and this means reducing the accounting information quality (Tariverdi et al., 2012). According to these materials, the research hypotheses are presented as follows:H1: An increase in the quality of accruals causes a decrease in the cost of debt.H2: In the period of the COVID-19 pandemic, the intensity of the effect of accruals quality on the cost of debt has decreased.MethodologyThis research is practical, analytical, quasi-experimental, correlational in terms of research purpose, and retrospective and post-event in terms of the time dimension of the data. To collect financial and accounting data, Rahvard Novin database and reports published on Codal website were used, and Stata software was used to analyze the data. To fit the models, the generalized least squares approach was used.ResultsThe results show that compared to other years, during the COVID-19 pandemic, the accruals quality (the cost of debt) has decreased (increased) by 27% (35%). Also, the results indicate that an increase in accruals quality decreases the cost of debt. Furthermore, our results show that compared to other years, during the COVID-19 pandemic, the intensity of the effect of the accruals quality on the cost of debt has decreased.DiscussionThe research findings show that an increase in accruals quality significantly decreases the cost of financing. So, in order to reduce financing costs from debts, managers are advised to be diligent in improving the companies' accounting information quality. Finally, our results show that the cost of debt has increased during the COVID-19 pandemic, due to the decline in accruals quality and its components.ConclusionOur results show that with the increase in the quality of accruals, the cost of financing through debts has a significant decrease, and this decrease is more for the innate components of accruals quality than for its discretionary part. In addition, the findings indicate that during the COVID-19 pandemic, the intensity of the effect of the accruals quality and its innate and discretionary components on the cost of debt has decreased. The results of supplementary tests confirm the research main findings.
Ali Rahmani; Elnaz Tajvidi
Volume 3, Issue 11 , October 2005, , Pages 227-246
Abstract
In view of the expanding capital market, it is of great significance to recognize the variables affecting stock return and its price. There exist different methods for the prediction of stock return such as the Capital Assets Pricing Model, the so-called CAPM, Market Model, Arbitrage Pricing Theory and ...
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In view of the expanding capital market, it is of great significance to recognize the variables affecting stock return and its price. There exist different methods for the prediction of stock return such as the Capital Assets Pricing Model, the so-called CAPM, Market Model, Arbitrage Pricing Theory and Factorial Model. According to CAPM, β (Beta) is the only variable capable of predicting the return. The studies and researches carried out with respect to predictability potential of CAPM model and application of other variables; demonstrate that there exist other variables which outperform stock return predictability potential of the β (Beta).
Included among such variables are the size, debt to equity, Book to Market, earnings to price and sale to price ratios. The present research was aimed at testing the above-mentioned variables and the β (Beta) for the prediction of stock return in order to recognize the variables which are better capable of predicting the stock return in Tehran Stock Exchange (TSE).
Independent variable were tested against the dependent variable (return) on an annual basis for the years 1 376- 1382 (1997- 2003). Further, multivariable models were tested, both annually and pooled cross-sectionally. The pooled cross-sectional test results demonstrated that the model was statistically significant. However when the model was compared with single variable models, the increase in pred1ctabiltty potential was accepted. In single variable tests, no significant relationship was observed between debt to equity ratio and the stock return. Furthermore, no significant relation was observed between Beta and the Stock return, as predicted in CA PM model , and the results were dispersed and scattered. No significant relation was observed between magnitude of the total assets (logarithm) as size variable and the stock return in 4 consecutive years; however, when the size was defined in terms of stock market value, a significant relation was observed between the size so defined and the stock return in 4 consecutive years. There existed a significant rela1ion between the sale to price and the earnings to price ratios with the stock return in 4 consecutive years. However the Book to Markel ratio demonstrated great dispersion in results, indicating that there was no significant and stable relation. Considering the potential effect of the statistical models on the research findings, complementary tests were carried out on the basis of formation of portfolio based on Beta (β) and Book to Market ratio variables. Three portfolios were formed, taking into consideration the magnitude of each and every variable. The findings of such test substantiated that, during the years 1379-1380, portfolios with high beta (β) proved to have higher return compared to the ones with low Beta (β). With respect to the portfolios formed on the basis of Book to Market ratio, the findings proved compatible with the regression models.
Accounting report
Fatemeh Asnad; Hossein Fakhari
Abstract
Nowadays, the importance of water and the management of its resources are among the most controversial issues at the global level due to climate change. This issue is especially important in Iran, which suffers from continuous drought. Therefore, the aim of the current research is to explain the determinants ...
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Nowadays, the importance of water and the management of its resources are among the most controversial issues at the global level due to climate change. This issue is especially important in Iran, which suffers from continuous drought. Therefore, the aim of the current research is to explain the determinants affecting water reporting in the listed companies at the Tehran Stock Exchange. For this purpose, by using the data of 102 companies during the years 2012 to 2021 which were selected by elimination method, the determinants affecting the disclosure of water reporting were determined and analyzed by stepwise regression and multiple regression method. The results of this research showed that the highest amount of disclosure related to water belonged to chemical and oil industry companies, also in the investigation of the determinants affecting water reporting, it was found that the determinants of firm age, board size, financial expertise of the audit committee, concentration of ownership, institutional ownership, return on assets, average annual rainfall, reputation, regulation and sensitivity of the industry to water had an impact on corporate water reporting. These findings can be useful for planning and controlling water management, as well as for investors to know the drivers of corporate disclosure in forming their optimal portfolio.
M. A. EKBATANI; M. A. SANGELADJI
Volume 3, Issue 9 , April 2005, , Pages 1-27
Abstract
In this empirical study attempts were made to determine whether or not there was a significant difference between the opinions of academics and practitioners regarding the usefulness of traditional vs. contemporary managerial/cost accounting ...
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In this empirical study attempts were made to determine whether or not there was a significant difference between the opinions of academics and practitioners regarding the usefulness of traditional vs. contemporary managerial/cost accounting techniques. It was also tried to determine the degree of influences of various factors such as age, education, position, size of company, number of products, type of industry and several others on the opinion of 63 participants, 34 academics and 29 practitioners, regarding the above issue. Another attempt that was made in this study was to acquire some information about the opinion of academics and practitioners regarding the degree of importance of eleven skills and ten characteristics for managerial accounting graduates.
The outcomes of this study revealed that out of 38 managerial/cost accounting techniques presented in this research, 16 were rated high by all participants. This ranking was based on the statistical Means calculated for the total of 63 participants in this study. Out of these 16 techniques, 12 were selected by both groups of academics and practitioners. There were, however, seven techniques that ranked very low and viewed the least important by both participants. The outcomes of the research, however, indicated that a few demographic factors had some influence on the decisions and rating of the participants.
The outcomes of this study also revealed that from the 11 preferred skills for managerial/cost accounting graduates, the "thinking skill" was rated top by both the academics and practitioners. It was, then, followed by "listing", "quantitative", "problem solving" and "writing" skills. The three skills that were ranked as less important by both groups were, "reading", "speaking" and "microcomputer" skills. The least important skills by both groups were "management", “social” and "marketing" skills.
In regard to the important characteristics for accounting graduates, the outcomes of this study indicated that both practitioners and academics selected "common sense", "motivation", "ethical awareness", and "intellectual capacity" as the top four important characteristics. In contrast, "professional appearance", "assertiveness", and "pleasant personality" were the three characteristics selected by both groups as less important. Based on the above observations, the main conclusion reached by this research was that no significant differences existed between the opinions of practitioners and academics regarding the list of the most important managerial/cost accounting techniques in this study.
Omid Pourheydari; Saeid Ali Ahmadi
Volume 4, Issue 15 , October 2006, , Pages 1-14
Abstract
This study examines the relation between residual earnings and stock prices in Tehran Stock Exchange (TSE). The analysis is based on a residual income model that expresses the value of the firm in terms of book value of equity and residual income. The model holds for any clean surplus accounting ...
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This study examines the relation between residual earnings and stock prices in Tehran Stock Exchange (TSE). The analysis is based on a residual income model that expresses the value of the firm in terms of book value of equity and residual income. The model holds for any clean surplus accounting system. The study address the question that whether book value per share (BV) and abnormal (residual) earnings per share (RE) have incremental and relative explanatory power or not. We find that RE have less explanatory power than BV. Also, we find that accounting book value of equity and residual earnings are positively and significantly related to current stock prices in Tehran Stock Exchange (TSE).
Marzie Hedayatipour; Nassirzadeh Farzaneh
Abstract
In this research, the effect of financial reporting quality model and timing of liabilities on investment efficiency as well as the effect of timing of obligations on the relationship between financial reporting quality and investment efficiency and inefficiency in listed companies in ...
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In this research, the effect of financial reporting quality model and timing of liabilities on investment efficiency as well as the effect of timing of obligations on the relationship between financial reporting quality and investment efficiency and inefficiency in listed companies in Tehran Stock Exchange is investigated. To testthe impact of 80 companies in the years 2007 to 2017, data was analyzed using Eviews software. In this research, three distinct methods (accruals, accruals, accruals, accruals, and accruals) were used to calculate financial reporting quality and their combined method. The results indicate that financial reporting quality has a positive and significant effect on investment efficiency. The quality of financial reporting does not affect investment and investment. Increasing the ratio of short-term debt to total debt will increase investment efficiency. Increasing the maturity of debt has no effect on investment and more. Other research findings indicate that the maturity of a debt, whether short-term or long-term, does not affect the relationship betweenfinancial reporting quality and investment efficient
Financial Accounting
Mahshid Shahrzadi; Darioush Foroughi
Abstract
The Aim of this study is to introduce the left tail risk as a driver for creating idiosyncratic volatility and explainer the negative returns due to high unsystematic volatility. In addition, the present study is trying to determine how the idiosyncratic volatility puzzle occurs. In this study, univariate ...
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The Aim of this study is to introduce the left tail risk as a driver for creating idiosyncratic volatility and explainer the negative returns due to high unsystematic volatility. In addition, the present study is trying to determine how the idiosyncratic volatility puzzle occurs. In this study, univariate and bivariate portfolio analysis as well as Fama and Macbeth (1973) regression have been used. For this purpose, the information of Tehran stock exchange and Iran fara bourse companies during the years 1384 to 1398 has been used. The results of this study indicate the existence of the idiosyncratic volatility puzzle (the low (high) returns of high (low) idiosyncratic volatility stocks) and left tail risk anomaly (the low (high) returns of high (low) left tail risk) in the research sample. The idiosyncratic volatility puzzle (the low (high) returns of high (low) idiosyncratic volatility stocks) is no longer detected when idiosyncratic volatility-sorted portfolios are neutralized to left tail risk, regression control for left tail risk and factor models include a left tail risk factor. The left tail risk plays the important role to explain idiosyncratic volatility puzzle (the low returns of high idiosyncratic volatility stocks) and the reason for this explanation is the falling stock price pressure with high left-tail risk on stocks with high unsystematic volatility.
A. Modarres; M. Fe’li
Volume 6, Issue 23 , October 2008, , Pages 89-106
Abstract
Globalization, through linking companies to international markets and increasing competitive space, has necessitated the restructuring of companies. Combination of companies, ownership and development of target markets are among the efforts made by companies in ...
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Globalization, through linking companies to international markets and increasing competitive space, has necessitated the restructuring of companies. Combination of companies, ownership and development of target markets are among the efforts made by companies in order to continue their economic lives. These companies are also forced to utilize domestic and international capital markets to obtain their financial resources. In this regard, corporate governance is a criterion which plays a fundamental part in decision making process of investors and leasers.
In order to investigate the role of institutional stock holders and percentage of non-Executive managers as some criteria of corporate governance on firm value, the 4-year data of 97 firms were studied. The findings of this study show that there is a significant relationship among institutional stockholders and company value, as well as presence of non-Executive managers and company value. The findings of this study, in line with similar researches, support the view that presence of institutional stockholders in the board of directors of companies increases company value.
Seyed Abbas Hashemi; Hadi Amiri; Roya Moeein Ghafghazi
Volume 10, Issue 38 , July 2013, , Pages 91-117
Abstract
Because the accounting profit computation does not consider the cost of capital, it has always been criticized. One of the proxies of accounting earnings that recently were taken into consideration by accounting researchers is residual income. In this study, the relationship between accounting earnings ...
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Because the accounting profit computation does not consider the cost of capital, it has always been criticized. One of the proxies of accounting earnings that recently were taken into consideration by accounting researchers is residual income. In this study, the relationship between accounting earnings and stock returns and the effect of changes in the accounting earnings on this relationship has been studied. Then using the concept of residual income, the impact of changes in earnings components on this relationship has been investigated. To test the hypothesis, a sample of 67 Tehran Stock Exchange listed companies during the years 2004 to 2010 were selected. To analyze the data and hypothesis testing, a multiple regression model based on combined data was used. The results indicate that there is a direct significant relationship between accounting earnings and current stock returns and the independent variable, earnings changes, affect this relationship. Also, if using residual income, the earnings could be decomposable to components, these components will strengthen the relationship between accounting earnings and current stock returns. Also the results revealed no relationship between accounting earnings and future stock returns.
Abbas Hoshi
Volume 4, Issue 16 , January 2007, , Pages 91-125
Abstract
The financial statements accompanied by independent auditors’ unqualified report which presents to capital market are used by interested beneficiary users. According to rules and regulations of the capital market, acceptance of the companies in the stock exchange list and its continuity requires ...
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The financial statements accompanied by independent auditors’ unqualified report which presents to capital market are used by interested beneficiary users. According to rules and regulations of the capital market, acceptance of the companies in the stock exchange list and its continuity requires transparent financial reports free of material misstatements.
Therefore name of those companies that have adverse or disclaimer audit opinion on their financial reports will be deleted from stock exchange list resulting unfavorable consequences for the company and its beneficiary users.
In capital market of many countries including China, in case of qualified audit report that includes serious explanatory paragraphs affecting financial statements, the companies would have specific period of time to remove the deficiencies and to have the opportunity to issue corrected (restated) financial reports. In Iran’s capital market, issuing adjusted audit reports is more common, hence in this research we study the factors affecting desirability of financial reporting in the frame work of giving them credibility through issuance of unqualified audit report.
In this study, 143 companies listed in stock exchange are selected through a statistical process and examined for a period of seven years, and thus the factors and variables affecting the companies’ financial reporting are determined in the capital market.
The research findings show that during the period under review the financial reporting have improved and benefited a favorable trend in the capital market.
Hamid Haghighat; Mohammad Rahimpoor; Nikoo Khansari; Ramin Ghorbani
Abstract
Investigating the Effect of Correlation between Firms'''''''''''''''' Earnings and Announcement Timing on the Accruals
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Investigating the Effect of Correlation between Firms'''''''''''''''' Earnings and Announcement Timing on the Accruals
s.m shariat panahi; A abjadpour
Volume 9, Issue 36 , January 2012, , Pages 93-121
Abstract
Price limit is a kind of circuit breaker which is used in developing stock exchanges and futures markets to prevent extreme price volatility, price manipulation, and financial crashes. Generally speaking, researchers and market participant usually disagree with price limit application, its efficiency, ...
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Price limit is a kind of circuit breaker which is used in developing stock exchanges and futures markets to prevent extreme price volatility, price manipulation, and financial crashes. Generally speaking, researchers and market participant usually disagree with price limit application, its efficiency, and its optimum range. Advocates believe that although price limit may delay price discovery, it prevents extreme price volatility and overreaction. On the other hand, critics assert that price limit causes price volatility spillover and intensify investor’s overreaction. Since there is no consensus over the price limit application and efficiency in the researches, it is recommended to study this issue using different methods. Therefore, we are trying to study price limit effects in Tehran Stock Exchange using Contrarian Investment Strategy. Our results show that price limit application in Tehran Stock Exchange delays price discovery but has nothing to do with investor’s overreaction. Consequently, it seems that regulators have prevented extreme volatility, although this constraint delays price discovery and reduces market efficiency.
M Ghaemi; M Moradipour; M Karim
Volume 9, Issue 35 , October 2012, , Pages 93-106
Abstract
Recently, some of the accounting researches in Iran capital market have been devoted to income smoothing, but not so many on relationship with stock value. We mean to evaluate the effect of income smoothing stock return. Therefore, there is a need to measure the expected return, for which we use Fama-French ...
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Recently, some of the accounting researches in Iran capital market have been devoted to income smoothing, but not so many on relationship with stock value. We mean to evaluate the effect of income smoothing stock return. Therefore, there is a need to measure the expected return, for which we use Fama-French three-factor model in this paper. To estimate the model, we use monthly data from 2006-2010. Also, sample concludes 90 listed companies in TSE. Income smoothing is measured by volatility ratio of operational income to cash flow from operation. Our findings show that income smoothing is another relevant factor in Fama-French three-factor model. In other words, income smoothing is relevant to stock return and the less volatility ratio, the less the expected return of shareholders.
Mehdi Safari Grayeli; Alieh Balarastaghi
Abstract
This study examines the factors affecting the quality of corporate governance in listed companies in Tehran Stock Exchange. In order to achieve this goal a comprehensive index of 18 factors related to corporate governance, which are compatible with Iran's reporting environment as a measure of the quality ...
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This study examines the factors affecting the quality of corporate governance in listed companies in Tehran Stock Exchange. In order to achieve this goal a comprehensive index of 18 factors related to corporate governance, which are compatible with Iran's reporting environment as a measure of the quality of corporate governance, was prepared. By using a sample consists of 101 firms listed in Tehran stock exchange in the period of 1388 to 1392 and by taking advantage of multivariate regression techniques based on the pattern of the data grew, results showed that firm size, leverage and profitability have a significant positive effect on the quality of corporate governance. But firms' investment opportunities and quality of auditing don’t have a significant effect on the quality of corporate governance. Findings While filling the research gap in this area, Can be helpful for investors, securities and stock exchange organization, and other users of accounting information, In decision-making
Yahya Hassas Yeganeh; Ali Asghar Arab Ahmadi
Volume 5, Issue 19 , October 2007, , Pages 93-114
Abstract
Despite information asymmetry between auditor and client that may result in adverse selection (undesirable client acceptance), auditor should evaluate all phases of audit engagement before establishing any relationship with prospective client. This is due to the fact that, the prospective clients that ...
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Despite information asymmetry between auditor and client that may result in adverse selection (undesirable client acceptance), auditor should evaluate all phases of audit engagement before establishing any relationship with prospective client. This is due to the fact that, the prospective clients that a firm accepts ultimately determine the nature of the firm's evolving client portfolio and as a result they affect the engagement quality. Professional standards state that firms should establish procedures for making the client acceptance decision. However, no guidance is provided about factors that should be considered in making the decision.
Results of this research show that audit firms consider audit risk factors and auditor business risk factors at the time of biding to firm for perform audit services and thus making decision about prospective client. Finding of this study indicate that personnel assignment, as a risk management strategy, affects client acceptance decisions.
Fatemeh Tavasoli; Mohammad Ali Bagherpour Valashani; Mohammad Javade Saee
Abstract
The results of prior researches have shown that the performance of accounting education systems in universities does not meet the needs of the current complicated markets. The purpose of this study is to identify and document the needs and expectations of accounting and auditing profession (in regard ...
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The results of prior researches have shown that the performance of accounting education systems in universities does not meet the needs of the current complicated markets. The purpose of this study is to identify and document the needs and expectations of accounting and auditing profession (in regard to the new legal requirements) in order to provide opportunity for related authorities for revising the approaches and methods of accounting education in 1395-94. In order to collect the required data, a questionnaire was designed regarding the research nature and subject. It has three parts including: internal control system, operational auditing, and operational budgeting in the form of 63 propositions. Respondents’ opinion on the level of significance, meeting the needs of the profession by the university, and education periods of the mentioned parts were investigated using this questionnaire. The statistical population of this research includes auditors (partner, manager, senior supervisor, supervisor, and senior auditor) of the audit firms, which are a member of Iranian Association of Certified Public Accountants. Data was collected through descriptive statistics (mean and standard deviation) and inferential statistics (test t- Student, single example of independent, t-test, ANOVA test for non-parametric equivalent) and was analyzed using the spss software. The research results show that the university has not performed well in meeting the needs of the profession in the three mentioned parts and there is an expectation gap in this regard. In addition, these parts and related topics should be taught in the Master’s degree period.
Farhad Fallahnezhad; Hossien Fakhari; Shahriar Zaroki
Abstract
To explain the estimation of conservatism as a limiting covenant in accounting, the current paper discussed Basu (1997) conservatism model and Nichols (2010) generalized conservatism model and examined the problems about these models as regards the validity and generalizability of the results of ...
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To explain the estimation of conservatism as a limiting covenant in accounting, the current paper discussed Basu (1997) conservatism model and Nichols (2010) generalized conservatism model and examined the problems about these models as regards the validity and generalizability of the results of the research on this topic .Accordingly, the discussed problems were explained and the solutions for solving these problems and upgrading the model to estimate conservatism were presented. The data from 2006 to 2016 on 87 corporations were used to carry out the investigations. Also, in addition to the static routine estimator, the dynamic panel estimator (the GMM-sys method) was used to test and estimate the models. The current research results revealed that the new modified conservatism estimation model yielded more appropriate results than the original Basu model and Nichols generalized model. Moreover, it indicated that the dynamic method of model estimation is more suitable than the static one. Finally, the current research showed that the results of the previous research conducted using Basu model to measure conservatism should be considered more cautiously and their application in the capital markets calls for re-examination
Hassan Farajzadeh Dehkordi; Leila Aghaei
Volume 12, Issue 45 , April 2015, , Pages 97-114
Abstract
This paper investigates the relation between fraudulent financialreporting and firms’ dividend policies. Specifically, this researchconcentrated on situations that it is possible to classify financialrestatement into fraudulent and non-fraudulent based on themanagement’s incentives for discretionary ...
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This paper investigates the relation between fraudulent financialreporting and firms’ dividend policies. Specifically, this researchconcentrated on situations that it is possible to classify financialrestatement into fraudulent and non-fraudulent based on themanagement’s incentives for discretionary accounting choices .The data is related to 247 firms (consisted of 2,238 firm-yearobservation) during 1381-1390. A Meet-or-beat model was used toclassify firms as making discretionary accounting choices foropportunistic meet-or-beat. Furthermore, a fixed effects logisticregression with panel data was used to test hypothesis. Results showthat dividend-paying firms have less likelihood to engage infraudulent financial reporting furthermore, the negative associationbetween dividend paying status and fraudulent financial reporting isstronger when the size of dividend payouts is larger .Overall, resultssuggest firm’s dividend policy is indicative of its earnings quality.Specifically, dividend policy unfolds the manager’s incentives forfinancial restatements.
M.H. Botshekan
Volume 1, Issue 4 , January 2004, , Pages 97-128
Abstract
Now a days , the size and trend of price indices i s one of the most effective factors of the investors, decisions in financial markets. Bearing i n mind the variety of investment ...
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Now a days , the size and trend of price indices i s one of the most effective factors of the investors, decisions in financial markets. Bearing i n mind the variety of investment sty les, Blue chip indices which reflect the behavior of a specific segment for the market are introduced in developed stock exchanges.
In this research, we study the methodology of measuring indices generally used in developed stock exchanges, and selecting qualified companies. Then we scrutinize the T.S.E. indices to identify its shortcomings and afterwards introduce the new index, entitled Bindex, using normative research method.
Gholamreza Islami; Hossein Zarei
Volume 2, Issue 7 , October 2004, , Pages 97-122
Abstract
This empirical study has been done with the goal of developing auditing knowledge and the efficiency of its operations when using the statistical analytical procedures.
In this research, eight alternative models have been evaluated, including five regression models, one time - series model ( consus ...
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This empirical study has been done with the goal of developing auditing knowledge and the efficiency of its operations when using the statistical analytical procedures.
In this research, eight alternative models have been evaluated, including five regression models, one time - series model ( consus X-Ii) and two non-statistical models (Martingale and sub-Martingale). Both financial and non-financial data were collected from a sample of petrochemical companies for the period march, 1998 through March 2001. The information was used to predict sales revenue and production expense account balances.
According to the results, regression models have better performance for predicting account balances in performing auditing analytical procedures in comparison to Two other models.
Logarithmic regression has been evaluated as the best statistical analytical procedure. The foresaid procedure has a constant performance in sample companies of the industry. In performing statistical analytical procedures, monthly models perform better than seasonal ones. Pooled models have a better ability for prediction than single company models.
Furthermore, the results of this research show incremental benefits of using nonfinancial variable in performing statistical analytical procedures in auditing
M. Bozorg Asl; S.M. Razavi
Volume 6, Issue 22 , July 2008, , Pages 97-117
Abstract
This article aims at identifying effective variables of macroeconomic on Tehran Stock Exchange returns. Variables which have been used to do the hypothesis test are Interest Rates, Interest Rates growth, GOP, GOP growth, Oil Prices and growth of Oil Prices. These variables have been considered as independent ...
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This article aims at identifying effective variables of macroeconomic on Tehran Stock Exchange returns. Variables which have been used to do the hypothesis test are Interest Rates, Interest Rates growth, GOP, GOP growth, Oil Prices and growth of Oil Prices. These variables have been considered as independent variables. The stock market return has been used as dependent variable. The measurement scope is over the period 1376-1385. The research shows that stock market return is relative to only interest rate.
Mehdi Sadidi; Maysam Ahmadvand
Abstract
This study documents the impact of corporate governance nature on momentum strategies profitability in Tehran stock exchange. To do so, we firstly examined the profitability of short term, midterm, and long term momentum strategies and found that, regarding both raw data and industry adjusted data, only ...
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This study documents the impact of corporate governance nature on momentum strategies profitability in Tehran stock exchange. To do so, we firstly examined the profitability of short term, midterm, and long term momentum strategies and found that, regarding both raw data and industry adjusted data, only midterm momentum strategy is profitable. Then, based on corporate governance index score, we categorized sample firms into two groups: democracies (firms with strong shareholder rights) and dictatorships (firms with weak shareholder rights). In the next stage, we checked momentum strategies profitability in each group. Research findings indicate that among democracies, short term and midterm momentum strategies allow investors to earn significant positive profits, while in companies with weak shareholder rights, all three momentum strategies record negative profits. The results of this research also present strong evidence that supports the market pressure hypothesis and confirm that managers of companies with strong shareholder rights are less likely to reveal private information than companies with weak shareholder rights
Rooholah Sedighi
Volume 9, Issue 33 , April 2011, , Pages 99-125
Abstract
The primary objective of this study is to show that board structure affects the value relevance of earnings. The role of board structure is to reduce the conflicts of interests between shareholders and managers. Four attributes of board structure includes Board size, CEO membership, Duality and Board ...
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The primary objective of this study is to show that board structure affects the value relevance of earnings. The role of board structure is to reduce the conflicts of interests between shareholders and managers. Four attributes of board structure includes Board size, CEO membership, Duality and Board independence are considered in this study. These attributes are used in this study to assess the impact of board structure on information content of accounting earnings. Information dynamics models, such as the Ohlson (1995) model provide a testable pricing equation that also identifies the role non-accounting information (i.e. corporate governance) plays in determining firm value. Based on Ohlson’s (1995) model, the change in value model, as developed by Easton and Harris (1991), is modified to include the proposed interaction between board structure and earnings management. In order to hypothesis testing, the pooled GLS regression is employed as the primary technique to estimate the coefficients. These coefficients are then examined using the Wald test to find out whether the earnings response coefficients after incorporating indictors of earnings reliability are significantly different from the earnings response coefficients irrespective of any propositions. The sample was drawn from listed companies in Tehran Stock Exchange (TSE) for the years 1383 to 1387. The final sample contained 675 firm-year observations. The results reveal that board structure have no effect on information content of accounting earnings.
