zahra fathee; Mahdi Bahar Moghaddam; omid pourheidari
Abstract
Auditors use professional judgment throughout the audit process. If the auditor's philosophical thinking has the comprehensiveness, reflection, and flexibility, it will lead to more professional judgment. Also, due to the increasing attention paid by audit firms to timing budgets as a measure of efficiency, ...
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Auditors use professional judgment throughout the audit process. If the auditor's philosophical thinking has the comprehensiveness, reflection, and flexibility, it will lead to more professional judgment. Also, due to the increasing attention paid by audit firms to timing budgets as a measure of efficiency, their difficulties in measuring audit quality have exacerbated the potential conflict between control costs and access to high quality audits. The purpose of this study is to investigate the effect of auditor's philosophical mentality on the auditor's professional judgment as well as the effect of time budget pressure on auditor's professional judgment and the effect of time budget pressure on the relationship between auditor's philosophical mentality and auditor's professional judgment. The research method was descriptive-survey and data were collected from a questionnaire distributed among auditors of auditing organization and auditing institutes member of CAA including all audit partners, managers and supervisors. The results showed that there is a positive and significant relationship between the three dimensions of philosophical mentality and professional judgment in the auditing firms of the member of the Iranian Society of Certified Public Accountants. Due to increased budgetary pressure, non-professional behavior is also more likely to occur. Thus, the mentality of completing the work due to budgetary pressures precludes auditors from applying the optimal philosophical mindset, and this may cause the auditor to judge superficially.
shokrollah khajavi; Hashem Nasirifar; Mohammad-Hossein Ghadirian-Arani
Abstract
Due to the benefits of political connections and the lower necessity of responding to market pressures to increase information quality by politically connected firms, it is expected that these firms will provide low-quality accounting information. With respect to the extended role of government in the ...
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Due to the benefits of political connections and the lower necessity of responding to market pressures to increase information quality by politically connected firms, it is expected that these firms will provide low-quality accounting information. With respect to the extended role of government in the economy of Iran, this study aims to investigate the impact of political connections on the accounting information quality of the firms listed in the Tehran Stock Exchange (TSE). The statistical sample includes 101 listed firms over the 2010-2018 period. Financial restatement and the intensity of financial restatement are used as indicators of the low quality of accounting information. To achieve the research objectives, two hypotheses have been proposed, and to test the hypotheses, the logistic regression and the multiple linear regression analysis in a panel data model were conducted. The results show that political connections have a positive effect on the occurrence and the intensity of financial restatement. Therefore, it seems that the firms' accounting information quality is affected by their political connections.
Financial Accounting
Iraj Davanipour; Ghasem Blue; Maghsoud Amiri
Abstract
This research aims to present a pattern for measuring the quality of financial statements. To achieve this aim, firstly by reviewing the literature and theoretical background and also running an expert interview, a collection of indexes related to the quality of financial statements are identified, and ...
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This research aims to present a pattern for measuring the quality of financial statements. To achieve this aim, firstly by reviewing the literature and theoretical background and also running an expert interview, a collection of indexes related to the quality of financial statements are identified, and then by using a questionnaire and performing Fuzzy Delphi method and confirmatory factor analysis we have identified indexes which have a significant effect on the quality of financial statements. After that, using the analytic network process, we have measured the relative weight of each of those indexes (7 indexes) regarding their effect on the quality of financial statements. Lastly, by measuring each of the indexes, and then computing the weighted average of measurements of all indexes (7 indexes), the measure of the quality of financial statements is computed. For assessing the validity of the presented pattern, we have used a regression model for 57 companies listed in Tehran Exchange for years from 1394 to 1396. We have shown that consistent with the literature, there is a significant negative relationship between the quality of financial statements and cost of equity. This relationship proves that the presented pattern has enough validity for measuring the quality of financial statements. Results of this research have shown that average of measures of quality of financial statements for 57 selected firms during years 1394 to 1396 are improved.
Jafar Babajani; Ali Saghafi; Vajhollah Gorbaizadeh; Hiva Rastegar Moghadam
Abstract
It is expected that accountants provide information which increases the ability of decision making and professional judgement. In this regard, the rendered information should entail characteristics such as ethical principles. In other words, professional accountants should comply not only with the accounting ...
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It is expected that accountants provide information which increases the ability of decision making and professional judgement. In this regard, the rendered information should entail characteristics such as ethical principles. In other words, professional accountants should comply not only with the accounting standards and technical norms, but also with ethics which is a preventive factor in financial fraud and corruption. However, the question is how to equip accounting graduates with ethical competencies. Increasing attention to this issue in recent years has resulted in creation of some models for educating ethical competencies. In the present research, the validity of three-dimensional model of ethical competencies’ education has been analyzed. Three-dimensional model of ethical competencies’ education emphasizes on education of eleven competencies as a separate course with combinational teaching method. The statistical population has consisted of bachelor students majoring accounting at the universities in Tehran. Moreover, two-stage sampling technique has been used as a sampling method. The research has been implemented using Pretest-posttest control group design and the data have been analyzed by univariate analysis of covariance. The results have shown that the mentioned ethical education has developed the students’ moral judgements. So, it is expected that by using the model in academia, accounting graduates will become familiarized with necessary competencies to make ethical decisions.
elahe sadat hosseini; Mozaffar Jamalianpour
Abstract
Since the auditor's information tool is the audit report, the language and wording used in this report are critical. Although the auditor's report has improved over time, it still suffers from problems. Therefore, audit reports must be prepared carefully to reduce misconceptions as much as possible. ...
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Since the auditor's information tool is the audit report, the language and wording used in this report are critical. Although the auditor's report has improved over time, it still suffers from problems. Therefore, audit reports must be prepared carefully to reduce misconceptions as much as possible. In the present study, the effect of earnings management on the tone and complexity of the auditor's reports has been investigated. After prior research and hypothesis development, 135 companies listed with the Tehran Stock Exchange during the years 1396 and 1397 were selected and tested using ordinary least squares regression. The results indicate a significant negative relationship between accrued earnings management and the positive tone of the auditor's report. The findings also show a significant positive relationship between earnings management and reporting complexity. In addition to expressing the importance and application of this issue for auditors, text mining of audit reports can also help policymakers and developers of reporting standards recognize the expectations gap and take steps to reduce this gap by providing readable audit reports. In addition, it helps to broaden people's understanding of the effects of using qualitative information, such as reporting language, in financial and auditing reports. Also, it shows the relationship between the tone of the auditor's report that is influenced by strategic choice and the use of qualitative disclosure is closely related to the company's performance.
Accounting report
Ali Saqafi; Ghasem Blue; HosseinAli Sohrabi Varzaneh
Abstract
Development of Earnings quality measures, especially Accruals quality measures, has been a critical line of research over more than three decades. Literature indicates that linear-regression-based measures are subject to (suffer from) significant estimation error in non-discretionary accruals estimation. ...
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Development of Earnings quality measures, especially Accruals quality measures, has been a critical line of research over more than three decades. Literature indicates that linear-regression-based measures are subject to (suffer from) significant estimation error in non-discretionary accruals estimation. Therefore, recent research used machine learning algorithms including multilayer perceptron and radial basis neural networks, in order to address the issue. However, being founded on Blackbox approach limits future development and applicability of these methods. So, to address the limitations, we have used Group Method of Handling Data (GMDH) approach, as a Whitebox approach, in order to estimate the accruals. Findings using data from 299 Tehran Securities Exchange listed companies during 1385 to 1397 suggests that GMDH-based models perform superior to regression models and multilayer perceptron neural networks in terms of estimation error measured by mean squared error. Moreover, Cash flow approach in total accruals calculation leads to less estimation error compared to balance sheet approach. As a result, the model developed in this article can be used by market participants such as regulators, analyst and auditors in order to detect probable financial reporting misstatements.
Accounting and various aspects of finance
mohammad namazi; Zahra Khorramdel Masouleh
Abstract
The purpose of this study is to investigate the effect of green product innovation and green process innovation on company's financial, environmental and economic performanc. The mediating role of environmental management accounting on the relationship between product and green process innovation and ...
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The purpose of this study is to investigate the effect of green product innovation and green process innovation on company's financial, environmental and economic performanc. The mediating role of environmental management accounting on the relationship between product and green process innovation and company performance is also examined. The statistical sample includes 202 companies and the standard questionnaire was used to collect data and the structural equation modeling approach and the PLS method were used to test the hypotheses and the conceptual model of the research. Findings show that green product innovation has a significant impact on the financial, environmental and economic performance of the company, both directly and through environmental management accounting. Green product innovation affects environmental performance in the oil and gas and petrochemical, metal and food industries, as well as economic performance in the metal industry alone. In addition, green process innovation has a significant effect on the financial and economic performance of the company both directly and indirectly through environmental management accounting, but the impact of green process innovation on the environmental performance of the company is only through the accounting variable of environmental management accounting. Green process innovation affects financial performance in oil and gas and petrochemical, metallic and chemical industries and economic performance only in oil and gas and petrochemical industries. In the cellulose industry, neither green product innovation nor green process innovation affects any of the company's operations. Findings show the importance of green innovation and environmental management accounting in improving the company's performance.
Accounting tools
Jafar Babajani; Farrokh Barzideh; Vahid Mohammadrezakhani
Abstract
Public Sector Internal Audit, by delivering reliable and consulting services in line with improvement and eliminate challenges can support organizations to achieve goals and provide better services. The purpose of this study is to provide a model for the establishment of internal audit in the public ...
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Public Sector Internal Audit, by delivering reliable and consulting services in line with improvement and eliminate challenges can support organizations to achieve goals and provide better services. The purpose of this study is to provide a model for the establishment of internal audit in the public sector entities in Iran. The approach of the research is based on qualitative method by using fuzzy Delphi model. The statistical population consisted of 85 experts and elites in the internal audit who were selected as the expert group of the research by using non-probability sampling technique. Finally, after the consensus of the experts, we establish the framework internal audit in public sector by considering external environment and our country criteria. This framework can assisting ministers and heads of state agencies in promoting the level of performance and evaluation of financial and operational accountability in addition to growth and improvement of the financial oversight system and the increase of efficiency, effectiveness and economic scale in the public sector.1- IntroductionInternal audit, as a part of the internal control system and one of the important components of corporate governance, plays a significant role in creating added value by improving the quality level of the organization's operations and activities and complying with laws and regulations and their implementation methods.Internal audit is one of the effective tools in the process of realizing and evaluating the level of financial and operational accountability. In this process, the government acts as a respondent and citizens and representatives will play a role as receivers of the answer. In such a system (if such an approach is accepted), the minister or the head of the executive body, in terms of the heavy responsibility he has for accountability, designs and implements appropriate control mechanisms to ensure compliance with laws and regulations. The questions raised in this research can be summarized as follows:Main question 1: What is the pattern of establishing internal audit in government institutions of the public sector of Iran?The purpose of this research is to provide a model for the establishment of internal audit in the government agencies of the public sector of our country.2- Literature ReviewIn a report, the Organization for Economic Cooperation and Development (OECD) (2011) examined the role of internal audit and internal control as a means of strengthening the transparency and accountability of the public sector.Gamayouni (2018) in a research investigated the effect of the efficiency of the internal audit function and the implementation of the accrual-based government accounting standard on the quality of financial reporting. Dunya and Barak (2021) addressed the issue of internal control, a lever for good governance of state-owned companies in Morocco.Rahmani et al. (2014) examined the obstacles to the establishment of internal audit units in public universities in Iran. The obstacles facing the establishment of the internal audit unit are placed in 3 main groups: "Cultural, organizational and legal obstacles", "Lack of recognition, training and proper familiarity" and "Obstacles related to the employees of the internal audit unit".Nikbakht et al. (2016) in a research, analyzed Vera's data with the help of open, central and selective coding method which is specific to grounded theory approach. Moradi and Bahri Terali (2017) studied the factors affecting the effectiveness of internal audit in improving internal controls in banks and state-owned companies.3- Research MethodThe current research is an applied and developmental research. In this research, it seeks to know the existing conditions and help in the decision-making process, so it is classified as a descriptive research, and it also seeks to obtain the opinion of a large statistical community on the subject of the research, so it is a descriptive-survey research.According to the use of the fuzzy Delphi method, the statistical population of the research includes experts based on the three characteristics of "presence of representatives of expert groups", "deep knowledge of the research topic" and "breadth of opinion and knowledge". ", from among expert groups such as auditors. The head of the State Court of Audit, auditors of executive bodies, and directors of audit organizations and academic faculty members of universities who have experience in the field of internal audit using non-probability-chain or network sampling method Barfi) were selected.In this research, first, to identify the dimensions, components and indicators of the internal audit establishment model, the subject literature has been reviewed using the library study method. After identification, the examples of these cases in the public sector of our country were examined based on the opinion of experts. Considering the advantages of the fuzzy Delphi method (29FDM) compared to the traditional Delphi method (30TDM), the fuzzy Delphi method has been used in this research.4- Research findingsIn the data collection phase, 85 questionnaires were completed and presented by 100 members of the expert group. 14.1% of the respondents to the questionnaire questions are in the doctoral level, 77.6% are in the master's level, and 8.2% are in the bachelor's degree. 18.8% of the respondents to the questions of the academic questionnaire, 41.2% were accountants and 40% were auditors of the Court of Accounts.According to the education distribution of the respondents who form the expert group, the obtained results are reliable. In this research, we tried to use the most appropriate group to achieve more accurate results. The reliability of the questionnaire was determined by Cronbach's alpha method. If the obtained alpha coefficient is more than 0.7, it has an acceptable reliability test, which was obtained in this research with a coefficient of 94. Therefore, the questionnaires of this research have good reliability. Based on the results of binomial test for all items, the significance level is less than 0.01. Therefore, at the 99% significance level, the ratio of agreement and disagreement is not the same, and because the ratio of agreement is more than 0.5, the initial agreement of the experts with the items is acceptable. After the binomial test, fuzzy analysis was performed using triangular fuzzy shapes. If this number is greater than 7, it is accepted, otherwise it is rejected.5-DiscussionThe importance of the role of internal audit in public institutions has increased in the last two decades. Internal controls and auditing are considered a desirable function to assist public sector management. Because internal audit plays a fundamental role in maintaining public funds, discovering and preventing abuses and mistakes, and improving methods.6-ConclusionIn this research, an attempt was made to present the model of establishing internal audit in a local way. In this regard, with the help of the fuzzy Delphi method, according to the opinion of experts, dimensions, components and indicators were presented in the form of the mentioned model.
Accounting report
Mozaffar Jamalianpour
Abstract
The importance and role of Media and NEWS are increased by improvement of Information and Communication Technologies. This article try to find role of medias’ news in corporate earning management strategies. So, I investigate for show impact of media coverage on replacement and trade off between ...
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The importance and role of Media and NEWS are increased by improvement of Information and Communication Technologies. This article try to find role of medias’ news in corporate earning management strategies. So, I investigate for show impact of media coverage on replacement and trade off between Accrual Earning Management (AEM) and Real Earning Management (REM) (Earning Management Strategy). For this purpose, I collect NEWS about listed companies during 2015 until 2020 and used Heckman's Two-Step for measure replacement between AEM and REM. I used Different in different and Feasible Generalized Least Squares (FGLS) methods for hypothesis testing.Results show that earning management strategies are different in reaction of media coverage. Increase of media coverage cause companies decrease AEM but they use REM more than usual in this position. In additional, research findings show that companies with higher media coverage and suspect to earning management try to more change in board of directors. So, results show that media has controlling and pressure effect on companies for earning management’s strategy.
Financial Accounting
Mohammad Hossein Setayesh; Zahra Rezaeianzadeh
Abstract
The main goal of this research is to identify and rank factors affecting innovation in accounting. In this research, firstly, accounting specialists were selected by purposeful sampling methods, and then qualitative data were collected using open questionnaires. After analyzing the collected data using ...
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The main goal of this research is to identify and rank factors affecting innovation in accounting. In this research, firstly, accounting specialists were selected by purposeful sampling methods, and then qualitative data were collected using open questionnaires. After analyzing the collected data using the phenomenology method, 11 factors were identified. Subsequently, a survey involving 17 faculty members from the accounting departments of Iranian public universities was conducted, and the Bayesian best-worst method was employed to rank these identified factors. Based on the results, the top 3 factors affecting innovation in accounting, in order of importance, include advances in information technology, changes in the business environment, and the level of financial knowledge and analytical skills of accountants. In order to improve the context of innovation in accounting, the results of this research suggest accountants should have general information about business and advances in information technology. They also, as the human capital of the innovation process in accounting, should continuously improve their level of financial knowledge and analytical skills.IntroductionIn recent years, the information technologies, such as cloud service models, big data, artificial intelligence, and blockchain are rapidly transforming the business environments and have raised concerns about the future of the accounting profession. Although these emerging technologies are still designed for the day-to-day work of accountants, they can significantly change the future work of accountants (Moll & Yigitbasioglu, 2019). It seems that in the face of the said technologies, the provision of accounting services, such as bookkeeping, preparing financial statements, preparing tax returns, and auditing, have all been subject to radical innovations (Bowles et al., 2020). According to the accounting literature, a new set of skills is necessary for accountants due to these emerging technologies. This is while job advertisements of Iranian companies (https://www.irantalent.com), still demand traditional job roles for accountants and instead, new job titles, such as fraud investigation specialist and senior data analyst have been emerging that can cover the newly defined job roles of accountants by literature. It seems that to reinforce the position of accountants in organizations, a change in accounting and in other words, the search for innovation in accounting is necessary.To address the lack of accounting literature in the field of innovation, the primary objective of this study is to identify and rank the factors that impact innovation in accounting by using qualitative methods, to initiate the expansion of innovative thinking and the creation of innovative ideas in accounting.MethodologyThis study used the phenomenology method to identify the factors affecting innovation in accounting. The accounting specialists were chosen as an informant using purposeful and snowball sampling methods. The twelve accounting specialists who participated in the research offered a wide range of services, including auditing, consulting, financial statement preparation, and tax accounting. Data collection was carried out mainly by means of an unstructured questionnaire supported by a telephone interview. Finally, by the use of Colaizzi’s method of data analysis, the factors affecting innovation in accounting were identified (Wirihana et al., 2018, p. 31).The Bayesian best-worst method was selected to rank the factors affecting innovation in accounting. The decision-makers were seventeen faculty members in the accounting department of Iranian public universities who had publications that transfer the concept of some sort of innovation in accounting. Bayesian best-worst method is based on pairwise comparison (Mohammadi & Rezaei, 2020). Pairwise comparison data from the decision-makers who participated in the research was collected through a standard questionnaire. Finally, using Python code for the chosen method, the factors affecting innovation in accounting were ranked.Results and DiscussionAccording to the results of Colaizzi’s method of data analysis, eleven factors were identified, and using the Bayesian best-worst method, the optimal weight of all factors was calculated. Table 1 presents the overall optimal weight and rank of factors affecting innovation in accounting. The findings indicate that the factors of advances in information technology (0.127806), changes in the business environment (0.12760311), and the level of financial knowledge and analytical skills of accountants (0.10951763) are respectively the most important factors. According to the optimal weight of all factors, it can be seen that none of the factors are irrelevant to innovation in accounting, because the weight of the least important factor is equal to 0.06665689. In fact, neither factor has an optimal weight lower than 0.065.ConclusionThe field of research into innovation in accounting is new, therefore this research generates new insight into the area. Among the practical implications, the study suggests that accountants consider environmental factors, such as advances in information technology and constantly update their knowledge and skills. It also suggests that they should improve their overall business knowledge by familiarizing themselves with different companies' operations and financial processes. Moreover, it suggests that they develop their analytical skills to be able to clarify the implications of decision-making results. Lastly, this study suggests that to achieve innovation in accounting, the conduct of research related to innovation and the cooperation of accountants can generate ideas to improve innovation in accounting.The study was qualitative in nature, as a result, this study cannot argue that the nature of innovation in accounting and the factors affecting it remain unchanged over time. Therefore, this study recommends more research in this field to contribute to a better understanding of innovation in accounting.
Accounting and various aspects of finance
shokrollah khajavi; soraya weysihesar
Abstract
Dividend policy is one of the most important topics in financial literature. CEOs with a high level of authority are motivated to use dividends payout as a strategy to build a reputation in capital markets, aiming to obtain external financing on favorable terms. However, the expected net value of such ...
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Dividend policy is one of the most important topics in financial literature. CEOs with a high level of authority are motivated to use dividends payout as a strategy to build a reputation in capital markets, aiming to obtain external financing on favorable terms. However, the expected net value of such a reputation depends on the likelihood of external financing, which is associated with low profitability and high volatility of cash flows. Therefore, this study aims to investigate the effect of CEO authority on the dividends payout probability in the conditions of low profitability and high volatility of cash flow. In doing so, 128 companies listed on the Tehran Stock Exchange were examined from 2014 to 2021. The results show that the CEO authority has a negative and significant effect on the payment and increase of dividends. Furthermore, low profitability and high volatility of cash flow increase the negative effect of the CEO's authority on the increase of dividends. However, this factor does not have a significant moderating effect on the relationship between CEO authority and dividends payout. Additionally, financial limitations do not have a significant moderating effect on the relationship between CEO authority and payment and increase of dividends. IntroductionThe decision to pay dividends represents one of the most critical choices for managers. The theoretical foundation linking the CEO's behavior and the company's dividend payment is grounded in agency theory. Agency theory suggests that managers, who have control over the company's cash flows, might prioritize their own interests over distributing cash to shareholders. Paying dividends to shareholders diminishes the resources under managers' control, and consequently, reduces their power. Additionally, paying dividends heightens the likelihood of capital market scrutiny on the company, as it often leads to an increased probability of sourcing external financing for investment projects. Financing projects internally circumvents this oversight and the risk that funds may not be accessible or may only be available at high costs. Therefore, agency theory predicts that managers have incentives to portray financial weakness, thereby justifying their decisions not to pay or increase dividends. On the other hand, there are instances where a company's cash flow may be uncertain, such as when the company experiences low profitability and high volatility of cash flow. These two increase the probability of using external financing and are not influenced by powerful CEOs. Therefore, the uncertainty in cash flow overshadows the decisions related to dividends. This is attributed to the fact that powerful CEOs often have greater concerns regarding credit and reputation. Investors often view CEO power as indicative of a greater misalignment between managerial and shareholder interests, signaling weak internal governance and heightened risk of entrenchment or expropriation. Therefore, to provide funds to companies managed by powerful CEOs, investors demand higher returns, which results in an increase in the cost of external financing. Research indicates that powerful CEOs, akin to managers of firms with weak governance structures, encounter higher costs when raising external financing. Furthermore, when anticipating an increase in the need for external funds, these CEOs have a stronger incentive to mitigate reputational concerns by paying dividends. Therefore, powerful CEOs are more likely to pay dividends to invest in reputation, particularly in scenarios of lower profitability and higher cash flow volatility. Based on these considerations, the purpose of this research is to investigate the effect of CEO power on the probability of paying dividends under conditions of low profitability and high volatility of cash flow. Research Questions or HypothesisIn line with the research’s objective, this study seeks to answer the question: Does CEO power affect the probability of paying dividends? Also, do low profitability and high volatility of cash flow have a moderating effect on the relationship between CEO power and the probability of paying dividends? MethodsThe statistical population of this study comprises companies listed on the Tehran Stock Exchange. The research hypotheses were tested on 128 companies over an eight-year period from 2014 to 2021, using multiple regression model and logistic regression. The data necessary for measuring the variables and testing the research hypotheses were primarily sourced from the Rahavard Novin software, audited financial statements, and other reports available on the companies’ websites, Codal and the Securities and Exchange Organization. ResultsThe results show that the power of the CEO has a negative and significant effect on the payment and increase of dividends. Additionally, conditions of low profitability and high volatility of cash flow further amplify the negative effect of the CEO power on the increase of dividends. However, these conditions do not have a significant moderating effect on the relationship between the CEO power and the payment of dividends. Similarly, financial constraints do not have a significant moderating effect on the relationship between the CEO power and the payment and increase of dividends. Discussion and ConclusionThe negative effect of the CEO power on the payment and increase of dividends is in line with agency theory. This theory posits that managers, who have control over the company’s cash flows, might prioritize their own interests over distributing cash to shareholders. Paying dividends to shareholders diminishes the resources under managers' control, and consequently, reduces their power. Additionally, paying dividends heightens the likelihood of capital market scrutiny on the company. Therefore, managers may prefer to present a picture of financial weakness, leading them to be less inclined to pay dividends. The research also revealed that while financial constraints, as well as the combined effect of low profitability and high volatility of cash flow, have a negative and significant relationship with the payment and increase of dividends, financial constraints do not significantly moderate the relationship between CEO power and the payment and increase of dividends. Furthermore, low profitability and high volatility of cash flow do not have a significant moderating effect on the relationship between CEO power and the payment of dividends. However, they do exacerbate the negative effect of CEO power on the increase of dividends. The findings align with the signaling theory of dividend policy. The Information content or signaling theory predicts that in a signaling equilibrium, where a reduction in dividends is associated with a decrease in shareholder wealth, managers are motivated to avoid such outcomes. Therefore, they choose a dividend policy where the declared dividend is lower than the expected dividend. This approach allows them to maintain consistent cash dividend even if subsequent cash flows turn out to be lower than expected. This consideration leads to the prediction that when future cash flow is highly volatile, the dividend payout ratio will be lower. In fact, this implies that when facing uncertainty in cash flow, companies prefer to maintain a low dividend ratio due to the dividend signaling property. They aim to avoid the subsequent losses of dividend cuts, as reducing dividends may lead to a significant drop in the company’s value. The absence of a significant impact from financial constraints and the interaction of low profitability and high volatility of cash flow on the decisions of powerful CEOs to pay dividends indicates that managers likely weigh other factors when determining dividends. Additionally, the need to maintain and build the reputation of powerful CEOs does not depend on paying dividends.
Audit Quality
Mandana Taheri; Ghasem Blue; Ramin Parvarpour
Abstract
Information asymmetry and economic uncertainty are features of the capital market in today's complex business environment, which increase audit risk and litigation risk, and can be effective in explaining audit fees. The purpose of this research is to investigate the role of legal claims risk, information ...
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Information asymmetry and economic uncertainty are features of the capital market in today's complex business environment, which increase audit risk and litigation risk, and can be effective in explaining audit fees. The purpose of this research is to investigate the role of legal claims risk, information asymmetry and economic uncertainty in explaining audit fees. The time domain of the research is the period from 2013 to 2021 and the research sample includes 120 companies listed on the Tehran Stock Exchange. Research findings, based on analysis using multivariable regression models on combined data, show that among the macroeconomic variables investigated (including economic growth rate, inflation rate, exchange rate, and interest rate), both economic growth rate and inflation rate have a direct and significant relationship with the audit fee. Additionally, there is a direct and significant relationship between the risk of lawsuits and information asymmetry with the audit fee. The results indicate that the risk of lawsuits, economic uncertainty and information asymmetry play an effective role in explaining auditors' fees. IntroductionAudit fees indicate the amount of auditors' effort to reduce the audit risk to the reasonable level. It is a measure to control financial risk and some legal claims that are threatening audit firms. According to litigation risk, auditors try to control this risk by increasing their efforts and audit fees. Chen (2019) and Frino et al. (2022) state that information asymmetry and economic uncertainty increase audit risk and litigation risk, and can influence audit fees. In other words, audit services are necessitated by the conflict between shareholders and managers. Information asymmetry and economic uncertainty increase agency costs, thereby heightening the necessity for auditing to control and manage these costs. Consequently, auditors increase audit fees to manage audit risks and ensure the thoroughness of their audit work. Therefore, this research aims to explain the effect of litigation risk, information asymmetry, and economic uncertainty on audit fees. MethodologyOur data were collected using financial statements, notes, and audit reports in CODAL[1] database and Rahavard-e-Novin[2] software. The final sample for a period of 2013-2021 consists of 1080 firm-year observations. In addition, the GARCH models were employed to measure the independent variables. To test the first and second hypotheses of this research, model 1 is used:Afeet= litig riskt+ Asymmetryt+ Sizet+ INVRECt +Levt + ROAt+ losst+ CHANGEt +Adu sizet + Specialistt+ LIQUIDt + SALEt +Year Effects+ Industry Effects (1)To test the third hypothesis of research, model 2 is used:Afeet= Economic Growtht-1+ Inflation Ratet-1+ Exchange Ratet-1+ Interest Ratet-1+ Sizet+ INVRECt +Levt + ROAt+ losst+ CHANGEt +Adu sizet + Specialistt+ LIQUIDt + SALEt +Year Effects+ Industry Effects (2)Where, SIZE represents the natural logarithm of total assets; INVREC denotes the amount of inventory and receivables divided by total assets; Lev indicates total liabilities divided by total assets; ROA signifies net profit divided by total assets; LOSS is assigned 1 if a firm has experienced a loss in any of the last three years, and 0 otherwise; CHANGE is assigned 1 if a firm has changed its auditor, and 0 otherwise; LIQUID represents current assets divided by total assets; SALE represents the ratio of sales to assets; Adu size is a dummy variable that equals 1 if the audit firm was either the Iran Audit Organization (IAO) or Mofid Rahbar (an audit firm belonging to IACPA), and 0 otherwise. SPECIALISR is assigned 1 if the auditor is an industry specialist, and 0 otherwise. Audit Fee (AFEE): is the natural logarithm of the audit fee.Information Asymmetry (Asymmetry): According to the model of Venkatesh and Chiang (1986).Economic Uncertainty (RM): Economic uncertainty is the inability of agents to accurately predict the outcomes of decisions. In this research, it has been measured by four indicators, including the fluctuation of economic growth, inflation rate, exchange rate, and interest rate. In addition, a GARCH model was used to index these criteria. For this purpose, a volatile measure of changes in the Gross National Product (GNP) index was considered to be an indicator of the risk of macroeconomic factors that the firm faces in its financial and production decisions. The results of the estimation of the GARCH model led to conditional variances, which ultimately lead to the standard deviation or the concept of uncertainty upon taking the square root.Litigation Risk (Litig risk): We measure this variable based on Lowry and Shu (2002), Krishnan and Zhang (2005), and Sun and Liu (2011). ConclusionThe results of testing the first and second hypotheses indicate that the risk of lawsuits and information asymmetry have a positive and significant relationship with audit fees. In the third hypothesis, the effect of lack of economy on remuneration was investigated. In this research, four indicators including economic growth, inflation rate, exchange rate, and interest rate have been used to measure the economic uncertainty of macroeconomic variables. In this regard, the results of the hypothesis testing show that economic uncertainty based on inflation and economic growth criteria has a positive and significant relationship with audit fees. Additionally, economic uncertainty based on interest rate criterion has a negative and significant relationship with audit fees. However, the exchange rate indicator does not have a significant effect on audit fees. Therefore, it can be seen that audit risk as an indicator of determining audit fees is influenced by some economic variables such as inflation and economic growth.In order to strengthen the results and address potential endogeneity in the research models, we redefined the dependent variable as imaginary (bivariate) and re-estimated the initial models of all three hypotheses. The results of these re-estimations confirmed the findings of the least squares regression in the first model for the first and second hypotheses. In the third hypothesis regarding economic uncertainty, economic growth and inflation rate criteria, as well as exchange rate, lead to an increase in the audit fee, while interest rate causes a decrease in the audit fee. Additionally, new control variables were added to the initial models based on the information provided in previous sections. The results of these additions confirm the findings of the initial estimation of the hypotheses.
Hamid Khaleghi Moghaddam; Vahab Rostami
Volume 1, Issue 3 , October 2003, , Pages 2-26
Abstract
In this research, the Market efficiency related to going concern entity and its Probability reflect on the price/earnings ratio (P/E) was tested that whether, when going concern entity evaluated above later it's PIE become near to industry's P/E and vice versa? In this research, one of the bankruptcy ...
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In this research, the Market efficiency related to going concern entity and its Probability reflect on the price/earnings ratio (P/E) was tested that whether, when going concern entity evaluated above later it's PIE become near to industry's P/E and vice versa? In this research, one of the bankruptcy production models wdll- known as zargin Model is used for sorting and ranging the entities on the base of going concern, which its output data is limited on zero and one, indicates the probability of the bankruptcy and going concern of the entity. In the use of this model, since the model was prepared on the entities' activity environment and its structure in the other countries and it wasn't consistent for Iranian corporation's activity environment, so after selection of the sample consisted of 40 corporations in the SEC, its coefficients are corrected and constituted with Iranian corporation's qualitative and in the along of doing research at first , the efficiency of the model was tested with the sample consisted of 14 normal and bankrupt and going concern probabilities for the sample corporations of the car industry was computed. Also as regards the evaluating high and low of the P/E ratio was problem, the amount of farness and nearness of the entity's P/E to industry’s P/E are adopted and computed as favorable parameter. Then the existence of meaningful correlation relationship between computed going concern relatively ability and amount of contradiction of entity's P/E than industry's P/E was tested. The results of study showed that there isn't any meaningful relationship between these two parameters in the level of supportable error of 5 percent and we cannot use the evaluating of differences between entity's PIE to find out the amount their going concern ability in the future.
Ali Saghafi; Javad Rezazadeh
Volume 1, Issue 1 , April 2003, , Pages 3-39
Abstract
This study examines the relationship among the cultural values of Iranian society, disclosure and conservatism degree of Iranian firms in presentation of financial statements. It is argued that an empirical relation exist between the cultural value, as conceived by Hofstede’s theory of the four ...
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This study examines the relationship among the cultural values of Iranian society, disclosure and conservatism degree of Iranian firms in presentation of financial statements. It is argued that an empirical relation exist between the cultural value, as conceived by Hofstede’s theory of the four dimensions of cultural values (power distance, uncertainty avoidance, individualism, and masculinity) and the accounting values are captured by Gray’s two dimension (conservatism and secrecy). 64 corporate annual reports registered on Tehran Stock Exchange (TSE) were examined in order to determine whether culture values correlate with the degree of conservatism and level of disclosure. The results in general support the theoretical expectations.
Mohammad Ali Sari; Hosein Etemadi; Sahar Sepasi
Volume 14, Issue 54 , July 2017, , Pages 6-24
Abstract
In this study the relationship between tax avoidance and tax risk was investigated by measuring tax risk based on uncertainty approach using data collected from 114 companies during the years 2009 to 2015. For this purpose, the lower effective tax rate (ETR) and non-steady tax situation over time is ...
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In this study the relationship between tax avoidance and tax risk was investigated by measuring tax risk based on uncertainty approach using data collected from 114 companies during the years 2009 to 2015. For this purpose, the lower effective tax rate (ETR) and non-steady tax situation over time is considered as tax avoidance and tax risk, respectively. The results show that a significant negative relationship exists between the effective tax rate and tax risk. It means that companies with lower ETR cannot continuously preserve their low level of taxes, and therefore their tax risk would be high. Hence, the policy of decrease in taxes due to its uncertainty is risky tax avoidance. This finding provides new evidence about the impact of tax policy on the overall company performance. The results also show that income fluctuation increases tax risk and tax risk of small companies is higher than the big ones. Moreover, the financial leverage can reduce tax risk due to consequential regulatory mechanisms. It is noteworthy to mention that the findings of this study can be used in risk assessment of the corporate tax policies.
Saber Sheri Anaghiz Sheri Anaghiz; Bahram Mohseni Maleki Mohseni Maleki
Abstract
In this research, the usefulness of balance sheet and income statement information have been considered in compare with income statement to explain stock returns of 104 sample companies which are accepted in Tehran security exchange since 1382 till 1390. The investors consider future value of stock returns ...
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In this research, the usefulness of balance sheet and income statement information have been considered in compare with income statement to explain stock returns of 104 sample companies which are accepted in Tehran security exchange since 1382 till 1390. The investors consider future value of stock returns at the time of investment in companies share. This research, tried to help the investors to choose a best finance and investment chance. The data utilized to test the research assumptions are generally compound data. To test the research assumptions, multi variable regressions have been applied. The descriptive and perceptive statistical methods, including adjusted multiple, are applied.The result of this research indicated more ability and profitability of stock return at the time of using information in the model of balance sheet and income statement together in compare with only income statement usage. Specially in Loss versus profit companies and Young versus mature companies or with Firms with uncertain future earnings
Ali Saghafi; Roohollah Farhadi; Mohammad Taghi Taghavi Fard
Volume 12, Issue 45 , April 2015, , Pages 9-38
Abstract
According to Prospect Theory, Investors have different behaviors in theprofit and loss situations and indeed their trading behavior is different in bulland bear markets. This study uses quantile regression model (in differentquartiles) and OLS model to estimate beta of 180 firms. Results showed thatfirst, ...
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According to Prospect Theory, Investors have different behaviors in theprofit and loss situations and indeed their trading behavior is different in bulland bear markets. This study uses quantile regression model (in differentquartiles) and OLS model to estimate beta of 180 firms. Results showed thatfirst, equity total risk (standard deviation) increase in Upper quartile andsecond, stocks beta changes in different quartiles and by moving fromquartile 0.25 to quartile 0.75, systematic risk (beta) increases significantly.Linear regression model and Quantile regression model show also thatunexpected variance can explain excess return at least similar to expectedvariance. The results can also be interpreted with both Insight of standardfinance and insight of behavioral finance. In standard finance area, riskreturnpositive relation that exists in upper quintiles is consistent with longrun growth of economy. Moreover, negative relation between return and riskin lower quintiles imply more uncertainty and as a result causing stockreturns to fall. In behavioral finance area, regime-dependent behavior ofslope coefficients is consistent with prediction of Prospect theory ofinvestor’s behaviors around the reference point.
ali saghfi
jafar babajani
Ali Saghafi; Abdol Hossein Talebi Najafabadi
Abstract
Diffusion of corporate governance mechanisms leads to stabilize the financial markets, and economic growth and helps to companies to have a proper implementation of corporate governance in competition. Because proper implementation these mechanisms express of necessary motivation for managers to arrive ...
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Diffusion of corporate governance mechanisms leads to stabilize the financial markets, and economic growth and helps to companies to have a proper implementation of corporate governance in competition. Because proper implementation these mechanisms express of necessary motivation for managers to arrive to determinate goods, corporate proper value and also stockholders efficiency supervision, this approach leads to trust creation in investors. That this make success initial public offering stocks in corporate specially governmental corporate. of company in addition to the way of supervision on the efficiency of stockholders. In this research examining influence of above mechanisms on corporate value as a one of dimension of turn over in124 governmental and nongovernmental corporate that they have been initial offering in 2003-2013 time series in the Tehran stock exchange. research results indicate that opposite to the discussed theories, there is no significant relation between principle of corporate sovereignty including the establishing an audit committee, breakdown the role of managing director from chairman of the board direct and the size of managing board with the value (performance) of initial offering company. It seems Tehran stock exchange space is not that, the competition in the environment of competition enough and mainly audit committee’s structure have problems and managers have dominance on they and authorities that exist in charter of the audit committees are action unenforceable.
Ahmad Ahmadpour; Masoumeh Shahsavari; Alireza amoozad Khalili
Abstract
In the age that firms deal with various challenges, financial safety and theFactors which end with recession are of great importance. Along with thefact mentioned, the present study considers the investigation of the effect ofconditional conservatism and accounting-based earnings attributes on risk ofbankruptcy ...
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In the age that firms deal with various challenges, financial safety and theFactors which end with recession are of great importance. Along with thefact mentioned, the present study considers the investigation of the effect ofconditional conservatism and accounting-based earnings attributes on risk ofbankruptcy in Firms Listed at the Tehran Stock Exchange. The Z’altman isused for measuring the risk of bankruptcy and accruals quality, earningspersistence, earnings predictability, and earnings smoothness used formeasuring the Accounting-based Earnings Attributes.The results ofestimating of research hypotheses using the panel data techniques in eviewssoftware for 126 firm of Tehran’s Stock Exchange during a period of fiveyears from 2010 To 2014, suggest that not only using the accountingconditional conservatism does not make any important change in decreasingof risk of bankruptcy, but also it is able to increase the financial distress ofIranian firms. Also, the result show the significant negative relation betweenthe accounting-based earnings attributes (Accruals quality, persistence andpredictability) with risk of bankruptcy of firms. Generally, The results revealthat risk of bankruptcy of firms are mostly influenced by economicalcondition of the country, the politics of financing, the size of the firms, thesort of industry ,and improvement of accounting-based earnings attributesrather than conditional conservatism approaches.
Saber Sheri Anaghir Sheri Anaghir; Yahya Hassas Yeganeh; Mehdi Sadidy; Benyamin Narrei
Volume 13, Issue 52 , January 2017, , Pages 9-36
Abstract
Previous researches revealed that corporate governance mechanisms assists the investors in motivating and compelling pillars of company management to more efficient use of corporate resources with doing stewardship duty. Managers can play a critical role in using the resources through making appropriate ...
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Previous researches revealed that corporate governance mechanisms assists the investors in motivating and compelling pillars of company management to more efficient use of corporate resources with doing stewardship duty. Managers can play a critical role in using the resources through making appropriate decisions about optimal investment. Inefficient investment could be the result of poor corporate governance. In other words, corporate governance is a key and monitoring tool in investment efficiency. The purpose of this study is to analyze the relationship between corporate governance and investment efficiency in the firms listed in the Tehran Stock Exchange. For testing hypotheses multivariate linear regression model using estimated generalized least squares method (EGLS) was used. To reach the purpose of the study, a sample of 138 companies were selected by screening (systematic deleting) in the years 2008 to 2014. Based on 93 indicators of hassass yegane and Salimi (2011), we estimated the efficiency of corporate governance and its dimensions such as transparency, effectiveness of board, shareholder rights and the effects of ownership. We also measured the efficiency of investment according to the Richardson’s (2006) model. In general, the results show that corporate governance and its dimensions have a significant positive effect on the efficiency of investment. In addition, a significant and positive impact of variables control such as investment opportunities (Tobin's Q) and firm size on investment efficiency was confirmed. The cash flow had a negative and significant relationship on investment efficiency
Ali Saghafi; Ghasem Blue; Narges Rezapour
Volume 14, Issue 53 , April 2017, , Pages 9-44
Abstract
The importance of human capital (HC) is a broadly accepted concept and human capital financial reporting as the traditional concept of "human resource accounting", has a long history. However, human capital financialreporting is still an unresolved problem in reporting which makes the investigation ...
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The importance of human capital (HC) is a broadly accepted concept and human capital financial reporting as the traditional concept of "human resource accounting", has a long history. However, human capital financialreporting is still an unresolved problem in reporting which makes the investigation of human capital reporting quality an important issue. The research provides evidence on the value relevance and information contentof "Capital-Based Human Capital Financial Reporting Model". For this purpose, we utilized the value relevance models as an experimental framework. Using cluster sampling, we chose and examined 22 corporations,from 2011 to 2015. We utilized OLS to test our research hypothesis. The results indicated that capital-based model is relevant for measuring and reporting Iranian corporations' HC. After verifying the relevancecharacteristic using a quasi-experimental method, the information content of the model was examined by applying four-group experimental design with pretest and posttest at a higher level. The results of this experiment performed in controlled conditions and with the help of graduate accounting students of Allameh Tabataba'i University revealed that there are no significant difference between experimental and control groups' responses, and therefore there is no additional information content
Mohammad Esmaeel Fadaie Nejad; Ali Akbar Arbabian
Volume 4, Issue 13 , April 2006, , Pages 113-138
Abstract
This study examines whether capital expenditures provide value relevant information which is incremental to that of current earnings. Models in accounting or capital expenditures yield information about a firm's future earnings that is not captured by current earnings, as managers respond to private ...
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This study examines whether capital expenditures provide value relevant information which is incremental to that of current earnings. Models in accounting or capital expenditures yield information about a firm's future earnings that is not captured by current earnings, as managers respond to private information about future demand and costs through their investment decisions. Empirical research, however, has not provided consistent and strong evidence of this effect.
Research on the earning response coefficient (ERC) has shown that factors such as size, risk, and growth are important to the valuation of firm's earnings. Since earnings are reflection of the firm's investments, it seems natural to expect that valuation of the underlying investments is also sensitive to these and other relevant factors.
After controlling for size-related pre-disclosure information differences, we provide strong evidence that unexpected capital expenditures, in conjunction with mediating variables for growth, risk and earning levels, provide incremental value relevant information beyond unexpected current earnings and its mediating variables. So we find that capital expenditures changes are strongly and positively associated with excess returns.
Farokh Barzideh
Volume 3, Issue 11 , October 2005, , Pages 157-175
Abstract
In time past many ratios such as current ratio and quick ratio had bee11 used for evaluations of corporation liquidity and ability in debt repayment.
But in recent years because of some deficiency and defection of these two ratios some ...
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In time past many ratios such as current ratio and quick ratio had bee11 used for evaluations of corporation liquidity and ability in debt repayment.
But in recent years because of some deficiency and defection of these two ratios some other ratios such as liquidity index, cash comprehensive liquidity index, net liquidity index, cash conversion cycle, lambda and etc have been presented .
In this essay in addition to presentation of these modem ratios via calculation of modem ratio correlation with traditional ratios, we will discuss to some extent the in formational identify of them. For this reason all active corporation i n cement industry from Tehran exchange have been chosen and ratios for a period of 5 year (1379-1383) have been calculated and the correlation of them have been calculated by SPSS (a software).
The results of this research show that although the modem ratios have a near relationship with traditional ratios but they are some differences that can play an important role on decision and they contain various and more information than traditional ratios and can help users to make their decision better than before.
