Saeid Yadegari; Seyed Abbas Hashemi; Hadi Amiri
Abstract
One of the main reasons for the accruals anomaly is the lower persistence of accrual component of earnings to its cash component. Conservatism, as an accounting convention, increases the reliability of accruals, therefore, it is predicted that conservatism increases accrual persistence. In this study, ...
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One of the main reasons for the accruals anomaly is the lower persistence of accrual component of earnings to its cash component. Conservatism, as an accounting convention, increases the reliability of accruals, therefore, it is predicted that conservatism increases accrual persistence. In this study, the effects of different degrees of accounting conservatism on the persistence of accrual component of earnings were investigated. Consequently, the role of accounting conservatism in the correction of the accruals anomaly was also evaluated which so far, no study has been conducted on this issue in Iran. Therefore, two hypotheses were developed which were statistically examined through multivariable regression models using combined data. Accordingly, using systematic removal method, 105 companies accepted in Tehran Stock Exchange during a 10 year period from 2007 to 2016 were selected as the statistical sample. It was found that accruals level showed a negative influence on the firm returns indicating the presence of accruals anomaly. Additionally, the results revealed that higher degrees of conservatism increased the persistence of accruals and as a result contributed to the correction process of accruals anomaly. The obtained results are consistent with the theoretical foundations of this research.
Shadi Jandaghyan; Shadi Jandaghyan
Abstract
Financial reports are tools that transfer accounting information to users,particularly investors. When the reporting quality is poor, investors rely on industry and market-level information. This action contributes to greater stock return movement with market and industry return, and Increases ...
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Financial reports are tools that transfer accounting information to users,particularly investors. When the reporting quality is poor, investors rely on industry and market-level information. This action contributes to greater stock return movement with market and industry return, and Increases stock return synchronicity. Factors such as free cash flow agency problem may cause distortion of information quality by managers as a result outsider investors are misled. The purpose of this study is to investigate the effects of free cash flow agency problem on stock return synchronicity and financial reporting quality. In order to test the hypotheses, data of 105 firms listed in Tehran Stock Exchange during the years 1388 to 1392 were used. Findings of research signify that companies with strong free cash flow agency problem have a greater stock return synchronicity. Results also indicate that free cash flow agency problem has a significant and negative impact on the financial reporting quality. Thus investors who invest in the stock exchange and their main attention is focused on free cash flow, must to consider free cash flow agency problem as a factor affecting decisions.
