stock exchange
Abdolrasoul Rahmanian Koushkaki; Sohrab Vahdan Asl
Abstract
The purpose of this study is to investigate the effect of fixed asset investment and financial performance on the relationship between social responsibility and debt financing. The present study is applied and from the methodological point of view, it is a causal correlation (post-event). The statistical ...
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The purpose of this study is to investigate the effect of fixed asset investment and financial performance on the relationship between social responsibility and debt financing. The present study is applied and from the methodological point of view, it is a causal correlation (post-event). The statistical population of the study is all companies listed in the Tehran Stock Exchange and using the systematic elimination sampling method, 141 Firms were selected as the research sample and were studied in a 10-year period between 2014 and 2023. The findings of testing the research hypotheses showed that there is a direct and significant effect between social responsibility and financing through debt.Investing in fixed assets does not affect the relationship between social responsibility and debt financing, but financial performance has an inverse and significant effect on the relationship between social responsibility and debt financing. By adhering to social responsibilities and respecting the rights of stakeholders and society, company managers can easily enjoy external financing by gaining a better image. Also, obtaining a higher social rank can show the company's image for investors more securely.1. IntroductionCompanies and economic institutions need appropriate and timely financing to invest and repay debts and increase working capital. Financial managers are always trying to increase the value of the company by inventing new financing methods.to be determined. Companies don't just use one type of resource, they try to use multiple resources to implement their plans and issues. Various factors can affect access through debt. Corporate social responsibility is one of the important issues that can affect the company's financing process, and it has been expressed as the process of creating wealth, promoting the company's competitive advantage, and maximizing the value of wealth and benefits created for the society, which generally considers the commitment and attention of the business to the quality of life of employees, customers, the local community, and the whole society in order to develop a sustainable economy.2. Literature ReviewDebt financing is a more desirable solution for financing due to tax savings and its lower rate compared to the expected returns of shareholders, but what is important for creditors is its repayment ability (Ebrahimi et al., 2019). The organization should always consider itself a part of the society and have a sense of responsibility towards the society and in order to improve the public welfare, employees, etc. to work independently of the direct interests of the company. The company's social responsibility focuses on important issues such as ethics, environment, security, education, human rights, etc. (Kordestani et al., 2018). Companies that have higher social responsibility can in fact be a high guarantee for the repayment of the company's debt, a guarantee for the proper functioning of the company, a guarantee for the absence of managers' behavioral biases, and a guarantee for the provision of correct information by managers to the capital market, which can increase the access of companies in financing through debt (Oyar et al., 2024). Therefore, according to the above, the first hypothesis of the present study is as follows:H1: Social responsibility affects access to financing through debt.Financial performance is an objective measure of how much an organization has used its assets to generate revenue. The financial performance of a company is one of the most important indicators for evaluating its performance and the degree of achievement of predetermined goals (Rahimian et al., 2013). Financial performance somehow indicates the efficiency or inefficiency of the company, so it can affect the opinions of investors and creditors in order to guarantee the company's performance. Therefore, according to the above, the second hypothesis of the present study is as follows:H2: Investment in fixed assets affects the relationship between social responsibility and access to financing through debt.One of the fundamental variables affecting the future status of the performance of companies and consequently the return on the shares of companies is the amount of investment of companies in fixed assets, which can pave the way for achieving the desired return in the future, or due to the tolerance of more risk on the company's financial position as a result of more investment, it reduces the company's power to maintain the current return and its growth in the future periods. In the long run, it also leads to a decrease in the company's efficiency and performance (Oyar et al., 2024). Therefore, according to the above, the third hypothesis of the present study is as follows:H3:Financial performance affects the relationship between social responsibility and access to financing through debt.3. MethodologyThe present study is applied and from the methodological point of view, it is a causal correlation (post-event). The statistical population studied in this study is all companies listed in the Tehran Stock Exchange and the period under study is from 2014 to 2023. In this study, the systematic elimination method has been used to reach the sample, and 141 companies have been selected as the research sample. Data analysis was done using the combined data method and the data panel approach and using Eviews 12 software to test the hypotheses.4. ResultsThe findings of testing the research hypotheses showed that there is a direct and significant effect between social responsibility and financing through debt . Investment in fixed assets does not affect the relationship between social responsibility and financing through debt, but financial performance has an inverse and significant effect on the relationship between social responsibility and financing through debt. By adhering to social responsibilities and respecting the rights of stakeholders and society, company managers can easily enjoy external financing by gaining a better image. Also, obtaining a higher social rank can show the company's image for investors more securely. 5. DiscussionThe results showed that corporate social responsibility directly affects financing through debt. In fact, when companies adhere to the principles and responsibilities that they have in the social field, those who want to work with the company on credit will have a more favorable environment for paying their debts, and this can increase the access of companies to financing from the The way of debt is simplified. One of the fundamental variables affecting the future status of companies' performance and consequently the return on companies' stocks is the amount of companies' investment in fixed assets, which can pave the way for achieving desirable returns in the future, or due to bearing more risk on the company's financial position as a result of more investment, it can reduce the company's ability to maintain its current return and its growth in future periods. Investing in fixed assets should be effective in financing through debt because such assets have the characteristic of collateralization, but the results showed that this feature has no effect on the relationship between social responsibility and financing through debt. Financial performance indicates the overall performance of the company and the amount of profitability derived from expenses and assets. Weaken the relationship between social responsibility and financing through debt. In fact, it can be interpreted that financial performance affects the relationship between social responsibility and debt financing.
stock exchange
shokrollah khajavi; Soraya Weysihesar
Abstract
Objective: Efficiency is one of the most important criteria that investors look for influencing factors to find suitable investment opportunities. Since managers have an effective role in making company decisions, they may deviate from optimal investment decisions. Therefore, the purpose of this research ...
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Objective: Efficiency is one of the most important criteria that investors look for influencing factors to find suitable investment opportunities. Since managers have an effective role in making company decisions, they may deviate from optimal investment decisions. Therefore, the purpose of this research is to investigate the relationship between CEO power and overinvestment. For this purpose, to explain the relationship between the CEO's power and overinvestment, three different effects have been discussed: the discretion effect, the risk aversion effect, and the ability effect. Methodology: The current research is descriptive of the correlational type and based on the objective of the applied type and has been conducted in a post-event method. In order to achieve the goal of the research, 123 companies admitted to the Tehran Stock Exchange were examined between 2016 and 2022. To check and analyze the data, the Eviews software was used, and to estimate the patterns, regression analysis with combined data was used. Findings: The results show that there is a negative and significant relationship between CEO power and investment inefficiency (overinvestment). Also, this relationship is not nonlinear. Originality / Value: The findings show that stronger CEOs who have more discretionary control (discretion effect) to engage in decisions based on their personal interests rather than stockholders do not harm shareholders’ interests by gaining personal benefits through overinvestment. Indeed, because of the risk aversion and ability effects, the private benefits of powerful CEOs are naturally aligned with shareholders’ interests, and they are then less likely to overinvest.
stock exchange
Mahdi Saghafi; Azam Pouryousof; Fatemeh Dastgerdi
Abstract
The aim of this research is to examine the impact of knowledge heterogeneity among board members on the optimistic tone of explanatory reports, as well as to investigate the mediating role of earnings management in this relationship. It is expected that differences in the characteristics of a company’s ...
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The aim of this research is to examine the impact of knowledge heterogeneity among board members on the optimistic tone of explanatory reports, as well as to investigate the mediating role of earnings management in this relationship. It is expected that differences in the characteristics of a company’s management team may influence the quality of both quantitative and qualitative financial reporting. To test the research hypotheses, panel data from 125 companies listed on the stock exchange over a 9-year period (2014- 2022) were used. The research models were estimated using multivariate regression analysis. The results show that the heterogeneity of managerial knowledge has a positive and significant effect on the optimistic tone of explanatory reports. Additionally, earnings management also has a positive and significant impact on the tone of explanatory reports. Ultimately, earnings management is shown to mediate the relationship between the heterogeneity of managerial knowledge and the optimistic tone of explanatory reports. The findings offer a new perspective on the role of executive management teams and contribute valuable insights to the literature on the strategic leadership of senior managers and annual board report disclosure.IntroductionGiven the explanatory reports are approved by a company’s senior management team, and the views of board members are communicated to information users, it is likely that differences in the knowledge of senior managers influence the tone of disclosure in these reports. It is expected that variations in the characteristics of a company's management team affect the quality of both financial (quantitative) and explanatory (qualitative) reports. Accordingly, this study investigates the relationship between senior managers' knowledge heterogeneity and the tone of explanatory reports, with a particular focus on the mediating role of earnings management. The importance of this research lies in its aim to raise stakeholder and user awareness of how managerial knowledge influences disclosure tone. It offers empirical evidence highlighting the relationship between managers' knowledge differences and the tone of their explanatory reports. Additionally, the study examines earnings management as a factor influencing this relationship. Since no prior research has specifically explored this topic, this study is the first to assess the impact of knowledge heterogeneity among senior managers on the tone of annual explanatory reports, emphasizing the mediating effect of earnings management. This research contributes to the development of the Iranian accounting literature from several perspectives. It advances the understanding of qualitative financial information, particularly the tone of management disclosures. Furthermore, it employs textual analysis methodology, a systematic and quantitative approach to interpreting communication content and understanding internal managerial attitudes. As this method is still emerging in the field of accounting, the study is also innovative from a methodological standpoint.According to the main question of the research and the presented theoretical framework, the hypotheses of the research are presented as follows:H1: The heterogeneity of managers' knowledge affects the tone of explanatory reports.H2: The heterogeneity of managers' knowledge affects earnings management.H3: Earnings management affects the tone of explanatory reports.H4: The heterogeneity of managers' knowledge affects the tone of explanatory reports through the mediating role of earnings management.2. MethodologyThis research is classified as quantitative, applied, and post-event in nature. Data were collected through document mining, using the new Rahavard software, and by reviewing audited financial statements of companies listed on the Tehran Stock Exchange. The statistical population consists of all companies listed on the Tehran Stock Exchange during the study period from 2014 to 2022. Companies meeting the following criteria were selected as the research sample:Their financial year ends in March, to ensure data comparability.They did not change their financial reporting period during the 9-year study window.Complete data for all variables used in this research were available.They are not banks, insurance companies, or investment companies.Based on these criteria, 125 companies were selected as the final sample. To test the research hypotheses, multivariate regression models were employed using the panel data method. All data were analyzed using Stata statistical software.3. Results and DiscussionThe findings related to the first hypothesis indicate that heterogeneity in managers' knowledge significantly influences the optimistic tone of management's explanatory reports. In other words, the greater the knowledge diversity among managers, the more frequently a positive tone is used in annual reports. This may be attributed to such managers being more risk-averse; concerned about the company’s future, they may attempt to present conditions in a more favorable light to stakeholders. This heterogeneity in managerial knowledge can lead to the presentation of an overly favorable or distorted image of the company’s situation to information users. The results of the second hypothesis show that knowledge heterogeneity among managers also has a significant positive effect on earnings management. That is, as the diversity in knowledge among managers increases, the likelihood of engaging in earnings management also rises. These results are consistent with the contractual incentives (reward) of managers. The findings of the third hypothesis of the study indicate that earnings management has a positive and significant effect on the tone of annual explanatory reports. This means that the lower the quality of financial reporting in companies, the more positive words managers use in their annual reports. In other words, managers seek to hide their possible undesirable performance by distorting users’ perceptions. This finding aligns with the opportunistic theory of managers. The findings of the fourth hypothesis indicate that earnings management can play a mediating role in the relationship between the differentiation of managers' knowledge and the tone of annual explanatory reports. This means that earnings management significantly reflects the effect of managers' knowledge heterogeneity on the tone of financial reports. This issue highlights the self-interest of such managers, who seek to reduce users’ ability to analyze information by disclosing it in an unrealistic manner.4. ConclusionThe results of the present research, while offering a new perspective on the role of the executive management team within companies, provide useful insights that enrich the existing literature on the strategic leadership role of senior managers and the disclosure of annual board reports. These findings contribute to optimizing the structure of senior management teams and can help companies make better decisions to improve overall performance.
stock exchange
Leila Farvizi; Sakineh Sojoodi; Hossein Asgharpour; Jafar Haghighat
Abstract
Numerous studies have investigated the relationship between systematic risk and a wide range of accounting and financial variables. However, most empirical studies have adopted the classical regression method, which entails limitations such as a restricted number of variables to preserve degrees of freedom. ...
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Numerous studies have investigated the relationship between systematic risk and a wide range of accounting and financial variables. However, most empirical studies have adopted the classical regression method, which entails limitations such as a restricted number of variables to preserve degrees of freedom. To overcome this constraint, the present study employs the Bayesian Model Averaging (BMA) method. Using data from 55 companies listed on the Tehran Stock Exchange between 2010 and 2023, this study examines the influence of 58 different financial and accounting variables on the systematic risk of these companies. The research aims to identify the key variables that significantly contribute to systematic risk. The findings reveal that among the examined variables, company size has the strongest impact on systematic risk, with a positive coefficient. In second and third place, asset turnover and operational efficiency demonstrate significant effects, with the former exhibiting a positive coefficient and the latter a negative coefficient. The fourth influential variable is the ratio of long-term debt-to-equity, showing a positive coefficient. Lastly, the ratio of a company's market value to the book value of its total assets is identified as the fifth influential variable, exerting a negative impact on systematic risk. IntroductionUnderstanding the drivers of systematic risk is crucial for investors seeking to optimize their portfolios and for companies aiming to develop robust risk management strategies. While many studies have explored the relationship between systematic risk and various accounting and financial variables, the majority have used classical regression methods, which tend to focus on a limited number of factors. This limitation often overlooks the complex interplay among variables that could better explain systematic risk. Given the growing need for more accurate models in the face of financial market volatility, this study adopts the Bayesian Model Averaging (BMA) approach to assess the impact of a wider range of accounting and financial variables on systematic risk. The research seeks to answer the following questions:Research Question(s)- Which accounting and financial variables most significantly influence the systematic risk of companies listed on the Tehran Stock Exchange?-Do the selected variables have a positive or negative impact on systematic risk, and how do these effects vary across different industries and financial contexts?2- Literature ReviewSystematic risk, commonly measured by the beta coefficient, represents the portion of a company’s risk that cannot be diversified away. Previous studies have highlighted several accounting and financial factors, including company size, financial leverage, operational efficiency, and asset turnover, as important determinants of systematic risk (Figure 1). However, the results across studies are mixed, and traditional models often fail to account for the complex interactions among variables. Additionally, several studies have noted that the method of variable selection and estimation can significantly influence the conclusions drawn about risk determinants. The literature suggests that large firms tend to have higher systematic risk due to greater exposure to market and economic cycles, while smaller firms may experience lower risk due to reduced exposure to such fluctuations. Other studies have explored the roles of profitability, debt ratios, liquidity, and asset management in determining market risk, but there is no consensus on which variables are most influential. Figure1- Fundamental Factors Affecting Systematic RiskSource: Brimble & Hodgson (2007) 3- MethodologyThis study employs the BMA technique to assess the impact of 58 potential accounting and financial variables on systematic risk. The BMA approach is particularly well-suited to this context because it enables the simultaneous consideration of multiple models, allowing for a more comprehensive understanding of the relationships between variables and risk. The study uses data from 55 companies listed on the Tehran Stock Exchange, covering the period from 2010 to 2023. The sample includes companies from a range of sectors, ensuring that the findings are not limited to any one industry. Data were collected from financial statements and reports available on the official website of the Tehran Stock Exchange (TSETMC), and the BMA method was implemented using Stata 18 software. The estimation process includes backward sampling, in which weak models are sequentially excluded and the best models are selected based on their posterior probability of explaining the data.4- ResultsThe results of the BMA analysis indicate that several variables have a significant impact on systematic riskCompany Size: Company size has the strongest effect on systematic risk, with a positive coefficient, indicating that larger companies generally face higher systematic risk.Asset Turnover: The asset turnover ratio, which measures how efficiently a company uses its assets to generate revenue, also has a positive effect on systematic risk.Operational Efficiency: Companies with higher operational efficiency exhibit lower systematic risk, as indicated by the negative coefficient for operational efficiency.Long-Term Debt-to-Equity Ratio: A positive relationship is found between the long-term debt-to-equity ratio and systematic risk, suggesting that companies with higher leverage tend to experience greater exposure to market risk.Market Value to Book Value Ratio: This ratio has a negative effect on systematic risk, indicating that companies with higher market valuations relative to their book values are less sensitive to market fluctuations.These variables were identified as the most significant based on their posterior inclusion probabilities (PIP), with company size having the highest PIP of 0.8143, indicating it is the most important determinant of systematic risk.5- DiscussionThe findings suggest that company size plays a pivotal role in determining systematic risk. Larger companies tend to be more exposed to broader economic fluctuations and market cycles, which can lead to higher systematic risk. Asset turnover, though generally considered a measure of operational efficiency, also contributes positively to risk, potentially due to the increased exposure of firms with higher asset turnover to volatile markets. Operational efficiency, on the other hand, shows a negative relationship with systematic risk, supporting the notion that companies with better control over their operations are more resilient to market shocks. This finding is consistent with the literature suggesting that operational efficiency can mitigate the impact of external risks. Similarly, the positive relationship between the long-term debt-to-equity ratio and systematic risk aligns with prior studies that highlight the role of financial leverage in amplifying market risk. Finally, the negative relationship with the market value to book value ratio indicates that investors view companies with higher market valuations as more stable, potentially because these companies are perceived as less vulnerable to market downturns.6- ConclusionThis study contributes to the understanding of the determinants of systematic risk by employing the BMA approach, which overcomes limitations inherent in traditional regression models. The results highlight that company size, asset turnover, operational efficiency, the long-term debt-to-equity ratio, and the market value to book value ratio are the key factors influencing systematic risk. These findings have practical implications for investors and corporate managers seeking to mitigate exposure to market risk. Companies, especially larger ones, can benefit from enhancing operational efficiency and optimizing their financial structures to reduce systematic risk. Future research could explore the interaction between these variables across different sectors and market conditions, and further refine models by incorporating additional macroeconomic factors.
stock exchange
Hasan Farajzadeh; Aَfsane Dehghan Dehnavi
Abstract
This study investigates the spillover effects in the disclosure timing of financial statements among peer firms, taking into account the deadlines stipulated by the Executive Regulations on Information Disclosure for registered firms under the Securities and Exchange Organization. The findings reveal ...
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This study investigates the spillover effects in the disclosure timing of financial statements among peer firms, taking into account the deadlines stipulated by the Executive Regulations on Information Disclosure for registered firms under the Securities and Exchange Organization. The findings reveal the presence of peer effects in the disclosure timing of pre-audited interim and annual financial statements, as a result of peer competition to attract market attention and mimicry in disclosure behavior. In contrast, no spillover effect is observed in the disclosure timing of the audited financial statement. Furthermore, the results provide insights into competition for market attention among peer firms when releasing semi-annual audited financial statements for clients audited by non-private audit firms (i.e., the Audit Organization and Mofid Rahbar Institute). This suggests a potential value-added role of non-private audit firms in enhancing the credibility of interim audited financial statements. The presence of a spillover effect in unaudited disclosures, contrasted with its absence in audited disclosures, may be attributed to the higher costs of accelerating the release of audited financial statements and the strategic timing of unaudited disclosures to elicit a desired market response.Introduction and Theoretical BackgroundFinancial disclosure is a critical component of corporate transparency, influencing investor decisions, regulatory oversight, and market efficiency. While prior research has extensively examined the content of financial disclosures, the timing of these disclosures remains an underexplored aspect of corporate strategy. Firms face a trade-off between timely disclosure, which may offer a competitive advantage, and the associated costs, including compliance requirements and managerial discretion.A growing body of literature suggests that firms do not make disclosure decisions in isolation but are influenced by the behavior of their peers. The concept of peer effects posits that firms within the same industry observe and often mimic the timing strategies of their competitors. This imitation may be driven by a desire to manage investor perceptions, respond to competitive pressures, or align with industry norms.The theoretical foundation of this study is rooted in signaling theory and the theory of strategic disclosure. According to signaling theory, firms disclose financial information strategically to convey positive signals to investors and differentiate themselves from competitors. Strategic disclosure theory further asserts that firms adjust their disclosure practices in response to market conditions and the actions of their peers, aiming to maximize market attention and investor confidence.Additionally, research on financial market efficiency suggests that early disclosures receive more market attention than later ones, creating incentives for firms to strategically time the release of their financial statements. Firms that delay disclosures risk negative investor sentiment or diminished market responsiveness. Consequently, understanding the peer-driven dynamics of disclosure timing provides valuable insights into how firms navigate regulatory constraints and competitive pressures.This study aims to fill a gap in the existing literature by examining whether firms align their financial disclosure timing with that of their industry peers, and how this behavior differs between audited and unaudited financial statements. By analyzing disclosure patterns over an extended period, this research sheds light on the broader implications of peer effects in corporate financial communication.Research MethodologyThis study employs a quantitative research design using archival financial data from 242 firms listed on the Tehran Stock Exchange between 2011 and 2022. The analysis is conducted through econometric modeling to measure the relationship between the disclosure timing of focal firms and that of their industry peers. Key variables include the timing of audited and unaudited financial statement disclosures, firm size, leverage, and auditor type. A regression model is used to assess whether firms adjust their disclosure timing based on peer behavior, while controlling for industry and firm-specific factors.Results and FindingsThe empirical findings suggest a strong peer effect in the timing of unaudited financial statements, where firms tend to align their disclosure timing with competitors to attract market attention. This pattern is particularly evident among firms with high market visibility, indicating that competitive pressures influence disclosure timing decisions.However, no significant peer effects are observed in the timing of audited financial statements. This may be attributed to stringent regulatory requirements and the involvement of independent auditors, which limit managerial discretion in disclosure timing. Additionally, firms audited by government-affiliated audit firms demonstrate greater synchronization in their disclosure timing, highlighting the potential influence of audit firm reputation on disclosure strategies.Another notable finding is that firms competing for market attention tend to accelerate their disclosure timing to differentiate themselves from peers. The results indicate that firms operating in highly competitive industries are more likely to engage in strategic disclosure timing to gain a competitive advantage in capital markets.Furthermore, the study finds that firms with larger market capitalization and higher leverage ratios tend to experience longer disclosure delays, reflecting the complexity of financial reporting processes in such firms. These findings support the hypothesis that firms strategically manage disclosure timing based on industry competition and firm-specific characteristics. ConclusionThis study provides empirical evidence that firms engage in strategic disclosure timing influenced by peer behavior. While unaudited financial statements exhibit a strong contagion effect, audited statements do not follow the same pattern, likely due to higher associated costs and regulatory constraints. The findings suggest that firms actively monitor their peers' disclosure practices and adjust their own timing decisions to maximize market attention.From a regulatory perspective, these results highlight the need for policies that consider the competitive dynamics of disclosure timing. Understanding peer-driven disclosure behaviors can help regulators refine disclosure rules to enhance market transparency and prevent firms from manipulating disclosure timing for competitive advantages.The implications of this study extend to both investors and corporate managers. Investors should be aware of the strategic motivations behind disclosure timing, while managers should consider the potential reputational risks associated with delaying financial disclosures. Future research could explore the effects of industry-specific regulations and investor reactions on disclosure timing strategies, as well as the long-term consequences of disclosure timing for firm valuation and market efficiency.
stock exchange
Zahra Heidary Sureshjani; Darioush Foroughi; Alireza Rohravi Dastjardi
Abstract
Assets are crucial for companies' current and future decisions, significantly influencing investors' perceptions. This study investigates the relationship between accounting asset informativeness and investors' beliefs, with a focus on the impact of accounting earnings quality. A sample of 249 companies ...
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Assets are crucial for companies' current and future decisions, significantly influencing investors' perceptions. This study investigates the relationship between accounting asset informativeness and investors' beliefs, with a focus on the impact of accounting earnings quality. A sample of 249 companies listed on the Tehran Stock Exchange between 2013 and 2023 was selected for analysis. The results indicate that increased asset informativeness positively influences investors' beliefs at both the aggregate and discretionary levels. However, asset informativeness related to inherent factors does not impact investors' beliefs. Furthermore, low earnings quality does not weaken the relationship between asset informativeness at the aggregate level and discretionary factors with investors' beliefs.IntroductionInvestors' beliefs and expectations play a crucial role in their decision-making process and behavior. Assets are a key factor in a company's present and future decisions, significantly influencing investors' confidence. Accounting assets help reduce uncertainty about a share's true value and shape people's expectations of the company. In other words, they contain valuable information, reflecting high accounting asset informativeness. Notably, accounting asset informativeness is distinct from earnings indicators. As a result, low earnings quality does not affect investors' beliefs due to the presence of accounting asset informativeness. Therefore, earnings quality may not influence the correlation between accounting asset informativeness and investors' beliefs. Based on this, the research aims to explore the connection between accounting asset informativeness and investors' beliefs, with a focus on the influence of accounting earnings quality. The researchers propose two hypotheses: Accounting asset informativeness positively impacts investors' beliefs, and earnings quality does not moderate the influence of accounting asset informativeness on investors' beliefs.MethodologyThis study focuses on applied research. Accounting asset informativeness is the independent variable, calculated using the explanatory power of the regression of a company's net operating assets on its operating earnings. A 10-year rolling regression was conducted separately for each company. Investors' beliefs were the dependent variable, and the earnings quality served as the moderating variable. Earnings quality was determined based on four criteria: earnings stability, earnings smoothing, accruals quality, and the relationship between earnings and value. The study included a sample of 249 companies listed on the Tehran Stock Exchange, spanning from 2013 to 2023.ResultsThe information provided by accounting assets has a positive impact on investors' beliefs at both the aggregate and discretionary levels. However, this information does not affect investors' beliefs when it comes to intrinsic factors. Additionally, low earnings quality does not weaken the relationship between accounting asset information at the aggregate level and discretionary factors with investors' beliefs.DiscussionAccording to neoclassical investment theory, changes in a company's market value reflect investors' assessments of its intrinsic value based on available information. Therefore, the informativeness of a company's accounting assets can affect its stock performance. When a company's capital stock is inaccurately measured by its accounting assets, changes in market value will have a greater impact than changes in accounting assets. On the other hand, when accounting assets are measured with less error, they provide more accurate information about the company's resources. Investors use this information to estimate the market value of a company's stock and form expectations about its intrinsic value. If accounting asset informativeness is strong, investors rely on asset information to analyze the intrinsic value of the stock. It seems that even if the quality of earnings is weak, it does not significantly impact investors' decision-making. Therefore, low earnings quality cannot disrupt the relationship between accounting asset informativeness and shareholders' expectations.ConclusionBased on the findings, investors and financial statement users should consider asset informativeness when determining the true value of a share. It is important to note that financial statement information is not limited to profit and loss but also includes the measurement of assets on the balance sheet.Creditors should not focus solely on profit and loss in their debt agreement; they should also consider the company's assets as a result of its current and future decisions. It is recommended that standard setters use asset informativeness to evaluate the effects of policy changes and balance sheet asset measurement changes to improve the implementation of accounting standards.Analysts should consider asset informativeness as a fundamental factor during analysis, especially when earnings quality is low. Additionally, company managers and planners should specify the purpose of obtaining operational assets and the capacity of those assets during financial reporting to attract the attention of investors and creditors.
stock exchange
Behrooz Badpa; Sohrab Osta; Fatemeh Darvish-Hoseini
Abstract
Working capital management is crucial for business growth and survival as it maximizes enterprise value and shareholder wealth, thereby maintaining competitive conditions and optimal performance. This study identified and explained accounting variables determining operational efficiency (OE) of the companies ...
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Working capital management is crucial for business growth and survival as it maximizes enterprise value and shareholder wealth, thereby maintaining competitive conditions and optimal performance. This study identified and explained accounting variables determining operational efficiency (OE) of the companies listed on the Tehran Stock Exchange (TSE), Iran, in light of working capital items. The statistical population consisted of all companies, and the samples were 112 cases listed during 2016-2020. Utilizing an applied, descriptive-correlational research design, the relationship between the variables was then established. The dependent variable was OE, evaluated using data envelopment analysis (DEA); and the independent ones were working capital items and dividend growth rate. To investigate the effect of the independent variables on the dependent one, eight hypotheses were formulated, and multivariate linear regression with panel data in a fixed-effects model was implemented. Testing the hypotheses at a 95% confidence interval demonstrated that average period of collection of claims, average debt repayment period, dividend growth ratio, cash holding level, and liquidity ratio have a significant positive effect on OE. Nevertheless, the cash conversion cycle, and average inventory turnover period have negative impacts. Managers are thus suggested to identify working capital items and exploit them along with short/long-term goals in companies. This is practical in evaluating financial flexibility and solvency, facilitating optimal liquidity, and increasing business profitability and performance. Furthermore, learning about such items is helpful to investors, creditors, and analysts to make optimal decisions. IntroductionWorking capital management in companies plays a key role in their growth and survival. This business process also helps increase the value of such entities and maximize their shareholder wealth, thereby maintaining competitive conditions and optimal performance. Representing the management of current resources and expenses in a company, working capital management has two components, namely, the management of current assets and liabilities, whose balance is of utmost importance. Decisions made about each one can affect the other (Jahan Khani & Talebi, 1999). On the word of Nath et al. (2010), working capital items have a critical role in the operational efficiency (OE) of a company as well as its marketing capability. In this line, Fang et al. (2008) also believe that working capital items have high liquidity, and are directly associated with the operating results and efficiency of a company, so managing cash in the short term is especially relevant for competition in markets. Therefore, the main items in working capital can significantly shape the operating results in a company, including contribution margin, market share, and OE. Against this background, the present study is to identify and explain the accounting variables determining the OE of the companies listed on the Tehran Stock Exchange (TSE), Iran, in light of the working capital items.Materials & MethodsConsidering the type of supervision and the degree of control, this study is categorized as field research, because the variables were investigated in their natural state. With regard to the data collection method, this study is placed into documentary research. Utilizing an applied, descriptive research design, the relationship between the given variables was established via a correlational study. The statistical population comprised the companies listed on the TSE, Iran, and the study samples included 112 cases listed during 2016-2020. The dependent variable was OE, evaluated using data envelopment analysis (DEA), and the independent variables were working capital items and dividend growth rate. Profitability index, company size, financial leverage, and operating cash flow (OCF) were correspondingly deemed as the control variables in the research model. To shed light on the effect of the independent variables on the dependent one, eight hypotheses were initially formulated, and then multivariate linear regression using panel data in a fixed-effects model was implemented to test them. In order to analyze the data and interpret the results, descriptive and inferential statistics were ultimately utilized.FindingsUpon presenting the descriptive statistics and checking the assumptions of the regression as well as determining themost suitable research model, the linear regression equation was estimated using the fixed-effects model, as described in table 1Discussion & ConclusionAs confirmed by the study findings, working capital items can explain the OE of the companies listed on the TSE, Iran. In this respect, the results of testing the main research hypothesis are consistent with the reports by Sun et al. (2020) and Nath et al. (2010). The outcomes of testing the secondary hypotheses also reveal a significant positive relationship between the variables of average period of collection of claims, average debt repayment period, dividend growth ratio, cash holding level, and liquidity ratio and the variable of operational efficiency. Nevertheless, there is a significant negative relationship between the variables of cash conversion cycle and average inventory turnover period and operational efficiency.Considering these results, cash holding level and liquidity ratio have a positive effect on operational efficiency, which supports the findings in Nath et al. (2010). According to Nath et al. (2010), working capital items with high liquidity help improve the OE of a company, indicating its high capability to manage cash in the short term, as a requirement for its competitive presence in markets. The study results also agree with those concluded by Afrifa et al. (2022) that holding more cash facilitates working capital efficiency. Based on the study findings, average inventory turnover period has a negative effect on OE, in harmony with the results in Deloof (2003) that high inventory level declines the profitability and performance of a company. In his opinion, managers can increase the profitability and performance of businesses by reducing inventory levels. In view of the cash conversion cycle in the given companies during the study period here, the relationship between this variable and OE is negative, which is consistent with the results in Abdulla et al. (2017) that companies with higher cash conversion cycle are more efficient in managing their working capital as compared with other entities.From this perspective, managers are suggested to identify the role of working capital items and exploit them in line with the short/long-term goals in companies. This is practical in evaluating financial flexibility and solvency, and facilitates achieving optimal liquidity, and subsequently increasing business profitability and performance. Furthermore, learning about the role of working capital items is of assistance to investors, creditors, and analysts to make optimal decisions. Furthermore, it is possible to carry out the same study in the future with respect to the size and type of industry of the companies listed on the TSE, Iran, and complete a comparative study regarding the companies operating in each industry. Besides, it is recommended to analyze the effect of various working capital strategies on economic added value in a separate study. Investigating the effect of various strategies and components of working capital on stock price and its fluctuations should also be the subject of further research.
