stock exchange
Mehrab Nasiry; Hossein Fakhari; Esfandiyar Malekian
Abstract
Block trades, by transferring a significant volume of shares and revealing company-specific information, can influence the price discovery process and market efficiency, thereby affecting the level of information asymmetry among market participants. Accordingly, the aim of the present study is to examine ...
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Block trades, by transferring a significant volume of shares and revealing company-specific information, can influence the price discovery process and market efficiency, thereby affecting the level of information asymmetry among market participants. Accordingly, the aim of the present study is to examine the impact of block trades on information asymmetry, with an emphasis on the moderating role of media coverage. The statistical population of this study consists of companies listed on the Tehran Stock Exchange during the period 2014 to 2024. Using a systematic exclusion method, data related to 100 companies and a total of 19,227 block trades were selected and analyzed. The generalized method of moments (GMM) was employed to test the research hypotheses. The empirical findings indicate that both the number of block trades and the ratio of block trade volume have a positive and significant impact on information asymmetry. Furthermore, the results of the second part of the study reveal that media coverage negatively moderates the relationship between block trades and information asymmetry. In other words, in companies with broader media coverage, the effect of increasing block trading on information asymmetry is weakened. Overall, the inefficient structure of the Iranian capital market, the high concentration of ownership, and the low level of information transparency have caused block trading, by itself, to fail to effectively disseminate company information and reduce information asymmetry. Nevertheless, expanding media coverage and providing timely information about significant company events—including block trades—can enhance market transparency, promote more accurate reflection of firm-specific information in stock prices, and consequently reduce information asymmetry.
Introduction
Block trading, as one of the significant events in capital markets, has always attracted the attention of financial analysts due to the large volume of shares transferred and its potential to influence prices and liquidity. These transactions can have consequences for market efficiency and information transparency by transferring information and altering the ownership structure of companies. On the other hand, media coverage plays a moderating role in this process by reducing information asymmetry and increasing investor awareness. Accordingly, the present study examines the effect of block trading on information asymmetry, emphasizing the moderating role of media coverage in the Tehran Stock Exchange. The main objective of this research is to analyze the effect of block trading on information asymmetry as one of the outcomes of such transactions and to identify the role of media coverage as a moderating factor. By providing a deeper understanding of how block trading affects the market, this research can assist investors and financial analysts in making more informed decisions. Furthermore, by examining the role of media coverage, it seeks to identify and analyze how public information influences market behavior and investor reactions to block trades. From a theoretical perspective, this study can contribute to the development of existing theories in finance and investor behavior, creating new frameworks for analyzing financial markets. In other words, this research can help establish a new discourse on the relationship between media, large transactions, and market behavior, paving the way for future studies in this field.
Methodology
In terms of purpose, the present study falls under applied research, as its results can serve as a basis for decision-making by managers, policymakers, and capital market investors. Regarding data type and execution process, this research adopts a quantitative approach and is ex-post-facto in nature. The research data include information from all companies listed on the Tehran Stock Exchange between 2014 and 2024 that conducted at least one block trade. After applying systematic elimination, 100 companies with a total of 19,227 block trades were selected as the final sample. Data analysis was performed using descriptive and inferential statistics and the Generalized Method of Moments (GMM). The tools used include Raah-Avard Novin and Excel for extracting and calculating variables, and Stata for hypothesis testing and result analysis. The validity of the GMM method was examined using Arellano & Bond (1991) tests, including the Sargan test for instruments and the m2 test for second-order serial correlation.
Findings
This research investigated the effect of block trading on information asymmetry in the Tehran Stock Exchange, considering the moderating role of media coverage. The main findings indicate that the number of block trades and the ratio of block trading volume have a positive and significant impact on information asymmetry. In other words, block trading is associated with increased information asymmetry. Additionally, media coverage negatively moderates the relationship between block trading and information asymmetry; that is, the positive effect of block trading on information asymmetry is weakened in companies with more extensive media coverage. This means that active news coverage, by reducing information asymmetry, diminishes the positive impact of block trading on information asymmetry. This result is attributed to the inefficient structure of Iran's capital market and the need for media coverage to enhance transparency and better reflect company-specific information in stock prices.
Conclusion
Regarding the level of block trading in Iran and its trends, it can generally be stated that Iran's stock market, unlike other countries, faces challenges due to issues such as inefficiency, high ownership concentration, and lack of transparency in information dissemination. The untimely announcement of positive and negative news and investors' lack of trust in available information prevent the informational content of block trades from being adequately reflected in stock prices. This situation increases access to private information for informed investors, thereby intensifying information asymmetry between informed and uninformed investors. Furthermore, the synergy between normal and block markets helps reduce liquidity shocks and the risk of these stocks. Companies with active block markets have higher liquidity, and their trading volume is greater compared to the normal market. Improved liquidity following block trades contributes to increased market efficiency. In the second part of the research, the conclusion indicates that media coverage has a positive effect on the relationship between block trading and information asymmetry. Companies that have active media coverage and promptly disclose information and objectives of block trades are able to attract new buyers, thereby reducing information asymmetry. The final conclusion is based on the principle that information transparency mechanisms, such as media coverage, play a vital role in optimizing the benefits of block trading for Iran's capital market.
Accounting report
Afsaneh Bahiraei; Seyed Ali Hosseini; Parisasadat Behbahaninia
Abstract
The aim of this research is to present a sustainability reporting framework for the Iranian banking industry. The research was conducted using a mixed methods approach; in the qualitative phase, the main dimensions and components were identified using data-based theory and their validity was confirmed ...
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The aim of this research is to present a sustainability reporting framework for the Iranian banking industry. The research was conducted using a mixed methods approach; in the qualitative phase, the main dimensions and components were identified using data-based theory and their validity was confirmed in the Delphi round. In the quantitative phase, the relative importance of the dimensions was determined using the interpretive ranking method. The findings showed that five dimensions of governance, social, environmental, economic, and compliance and risk are considered the main pillars of banks' sustainability reporting, of which the governance dimension has the greatest impact. The compliance and risk dimension indicates the bank's level of adherence to regulations, regulatory standards, and risk management mechanisms and plays a key role in promoting transparency and stakeholder trust. The final framework includes five dimensions, ten components, and fifty conceptual propositions and can provide a valid basis for policymaking, evaluation, and development of sustainability reporting in the banking sector.
Introduction
Sustainability reporting is increasingly recognized as a key tool for transparency and accountability beyond traditional financial reporting. Existing frameworks often face implementation challenges and may not address industry-specific needs. In the banking sector, effective sustainability reporting is critical due to its central role in capital allocation and reducing information asymmetry. Institutional gaps, high disclosure costs, and limited guidance hinder consistent reporting. Therefore, tailored reporting mechanisms are needed to enhance transparency, meet stakeholder expectations, and support sustainable investment decisions. This study explores these challenges and proposes a framework for improving sustainability disclosure in banks.
Literature Review
Sustainability originates from the broader concept of sustainable development, emphasizing the balance between current resource use and the needs of future generations. Initially focused on environmental aspects, sustainability reporting has expanded to include social and economic dimensions. Existing frameworks provide guidelines for non-financial reporting, yet they often lack balance across different sustainability indicators. Voluntary disclosure may lead to selective reporting, misrepresentation, and reduced transparency. Differences between industries further challenge the uniform application of these frameworks, particularly in sectors with unique operational characteristics. In banking, non-financial disclosures such as governance, risk management, and social performance are crucial due to the sector’s role in capital allocation. Institutional gaps and the absence of industry-specific standards hinder effective sustainability reporting in banks. Integrated reporting, which combines financial and non-financial information can improve transparency and stakeholder confidence. Tailored reporting frameworks are essential to address sector-specific challenges and enhance sustainability practices. This study focuses on examining the effectiveness and implementation of sustainability reporting in the banking industry.
Methodology
This study employs a mixed-methods approach, combining qualitative and quantitative analyses to examine sustainability reporting in the banking industry. The qualitative phase utilizes grounded theory, with semi-structured interviews and three-stage coding to identify key sustainability reporting criteria. Thirteen experts, including academics, banking managers, and auditors, participated until theoretical saturation was reached. The Delphi technique was then applied to validate and achieve consensus on the identified criteria, linking qualitative insights to the quantitative phase. In the quantitative stage, thirty bank managers and board members completed structured rating and pairwise comparison surveys using fuzzy linguistic scales. These data were analyzed to rank and weight the main components of sustainability reporting. Overall, the methodology integrates grounded theory, Delphi validation, and fuzzy multi-criteria decision-making to develop a robust theoretical framework for banking sustainability reporting.
Result
This study develops a tailored sustainability reporting framework for the Iranian banking industry using an integrated mixed-methods approach that combines grounded theory, Delphi validation, and interpretive ranking analysis. Through fourteen expert interviews, five overarching categories, ten core components, and fifty-two thematic propositions were identified, forming the foundational structure of the proposed framework. The Delphi process subsequently validated fifty themes, thereby reinforcing the coherence, relevance, and reliability of the extracted conceptual model. These components span human-resource capabilities, competitive and governance-related practices, social responsibility commitments, intergenerational environmental stewardship, and professional ethical obligations. In the quantitative phase, senior banking managers evaluated the relative influence of the framework’s components through structured pairwise comparisons. Results revealed that governance disclosure practices constitute the most influential and central axis of the proposed sustainability reporting framework. This includes transparent reporting of board activities, executive appointment and tenure criteria, remuneration mechanisms, and governance performance indicators. Strengthening disclosure in this dimension enhances organizational legitimacy, reinforces stakeholder trust, and improves the transparency of banking operations. Overall, the study presents a comprehensive and sector-specific framework that serves as a strategic roadmap for regulators, policymakers, and banks seeking to institutionalize sustainability reporting practices aligned with industry needs.
Discussion
This study develops a framework for sustainability reporting in the Iranian banking sector, highlighting governance as a core dimension. Detailed disclosure of board activities, remuneration policies, and decision-making processes enhances stakeholder trust and supports informed decision-making. Historically, non-financial governance information was reported symbolically, limiting transparency and accountability. The findings indicate that improved disclosure practices can strengthen internal controls and demonstrate the independence of bank boards. Governance-focused sustainability reporting also differentiates banks from competitors by signaling higher responsibility toward social, economic, and environmental interests. Implementing structured monitoring mechanisms and annual evaluation checklists can incentivize broader voluntary disclosures. Overall, the study emphasizes that robust governance reporting is essential for enhancing stakeholder confidence and promoting sustainable banking practices.
Conclusion
The study confirms that tailored sustainability reporting frameworks are crucial for the banking sector. Enhanced governance disclosure enables banks to build trust, improve transparency, and support stakeholder decision-making. Regulatory adjustments and policy interventions are necessary to encourage comprehensive voluntary reporting. Proper implementation can strengthen banks’ competitive positions while contributing to overall sustainable development. Ultimately, banks that prioritize sustainability reporting play a key role in guiding society toward broader sustainable outcomes.
Accounting and various aspects of finance
Mehdi Rezaei; Hamed Kargar
Abstract
The present study aims to investigate the impact of financial health indicators on the amount of loans received by customers from banks, considering the role of competition in the industry. The statistical population consists of banks listed on the Tehran Stock Exchange, with the study period ranging ...
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The present study aims to investigate the impact of financial health indicators on the amount of loans received by customers from banks, considering the role of competition in the industry. The statistical population consists of banks listed on the Tehran Stock Exchange, with the study period ranging from 2014 to 2023. After applying systematic exclusion criteria, 10 banks were included as the final sample. Ultimately, twelve hypotheses were formulated and tested using multiple linear regression analysis based on pooled data in EViews 12. The results of testing the research hypotheses indicated that capital adequacy, asset quality, profitability status, and liquidity quality have a direct and significant impact on the loans received by customers from banks. However, market risk sensitivity has an inverse and significant impact on the loans received by customers from banks, while management quality has no effect on the loans received by customers. Competition in the banking industry influences the relationship between financial health indicators and the amount of loans received, except for liquidity quality and market risk sensitivity.
Introduction
Banks play a vital role in the economy by providing credit and loans to individuals, institutions, and businesses—an essential element for economic growth and stability. Bank loans enable individuals and firms to finance various objectives such as purchasing homes, starting or expanding businesses, and investing in education. Access to credit is particularly crucial for businesses, allowing them to fund operating expenses, maintain inventories, and expand their workforce. Without access to bank loans, many firms face obstacles to growth or even survival, limiting overall employment and economic development. For individuals, credit provides opportunities for major life events such as buying homes or covering educational expenses, thereby contributing to long-term financial security and well-being. To assess the health and stability of banks, various tools have been developed. The CAMELS rating system is a vital instrument used by financial experts and researchers to evaluate the financial soundness and stability of banks. This model assesses banks based on six key components: Capital Adequacy, Asset Quality, Management Quality, Earnings, Liquidity, and Sensitivity to Market Risk. Such an evaluation can affect banks’ credit growth, since it directly influences their lending capacity and attractiveness to investors. Banks with strong financial health ratings generally enjoy better access to capital markets, enabling them to extend greater credit to customers. A high capital adequacy rating ensures sufficient capital reserves to absorb potential losses, supporting lending operations. High asset quality indicates a relatively low-risk loan portfolio, increasing the bank’s willingness to provide credit. Moreover, banks with strong management and earnings are better equipped to face economic challenges and maintain sustainable credit expansion.
Hypotheses
H1. Capital adequacy affects the amount of loans received by bank customers.
H2. Asset quality affects the amount of loans received by bank customers.
H3. Management quality affects the amount of loans received by bank customers.
H4. Profitability affects the amount of loans received by bank customers.
H5. Liquidity quality affects the amount of loans received by bank customers.
H6. Sensitivity to market risk affects the amount of loans received by bank customers.
H7. Competition in the banking industry affects the relationship between capital adequacy and customer loans.
H8. Competition in the banking industry affects the relationship between asset quality and customer loans.
H9. Competition in the banking industry affects the relationship between management quality and customer loans.
H10. Competition in the banking industry affects the relationship between profitability and customer loans.
H11. Competition in the banking industry affects the relationship between liquidity quality and customer loans.
H12. Competition in the banking industry affects the relationship between sensitivity to market risk and customer loans.
Research Methodology
This is an applied study and methodologically a causal-correlational (ex post facto) study. The statistical population consists of all banks listed on the Tehran Stock Exchange, covering the period from 2014 to 2023. The systematic elimination sampling method was employed to arrive at the final sample of 10 banks. Data analysis was performed using panel data methodology in EViews 12 to test the research hypotheses.
Findings
The results reveal that capital adequacy, asset quality, profitability, and liquidity have a direct and significant impact on the amount of loans received by bank customers. However, sensitivity to market risk has a negative and significant effect, while management quality shows no significant relationship. Moreover, competition in the banking industry affects the relationship between financial health indicators and the amount of loans received, except for liquidity and sensitivity to market risk, where the effect is insignificant.
Discussion & Conclusion
The findings suggest that banks’ financial soundness, particularly in terms of capital adequacy, asset quality, profitability, and liquidity, has a significant positive influence on their ability to extend more loans to customers. This underscores the importance of financial stability and robustness in banks in effectively contributing to national economic performance. Conversely, sensitivity to market risk exhibits a significant negative relationship, reflecting banks’ caution under high-risk conditions. In contrast, management quality alone does not significantly affect the volume of loans. Interaction analysis also unveils complex dynamics: competition amplifies the influence of capital adequacy and profitability on bank lending, indicating that healthier banks may compete more actively by offering greater credit to attract customers. Meanwhile, competition combined with management quality shows a negative effect on loan levels, and interactions with asset quality, liquidity, and market risk sensitivity remain insignificant.
Audit Quality
Mohammad Ali Hazegh; Rouhollah Bayat; Abbas Ali Daryaei; Mohammad Hossein Ghaemi
Abstract
the disclosure of material corporate information therein, the auditing of such reports has attracted the attention of capital market stakeholders. Accordingly, the aim of this study is to examine the existing ambiguities in the auditing practices of MD&A reports and to propose strategies for their ...
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the disclosure of material corporate information therein, the auditing of such reports has attracted the attention of capital market stakeholders. Accordingly, the aim of this study is to examine the existing ambiguities in the auditing practices of MD&A reports and to propose strategies for their resolution. This research adopts a qualitative approach, employing grounded theory and interviews with 24 experts, including auditing professionals, capital market analysts, managers of listed companies, and officials from the regulatory authority. The initial interviewees were selected based on theoretical sampling, drawing on their expertise in the subject area, and subsequent participants were identified through snowball sampling. The collected data were analyzed using open, axial, and selective coding techniques. Based on the findings, the main ambiguities in the current auditing practices of MD&A reports include: the auditor’s level of responsibility with respect to MD&A; the auditor’s opinion on MD&A in the context of interim financial statements; and the examination of forward-looking information in MD&A by the auditor. The key proposed strategies to address these ambiguities are: removing forward-looking information from MD&A or entering into a separate engagement with corresponding fees for the auditor to opine on these reports; refraining from expressing an opinion on MD&A in the context of interim financial statements or issuing such an opinion in accordance with review engagement procedures; and expressing an opinion on forward-looking information in MD&A in line with the relevant auditing standard.
Introduction
Given the economic conditions of Iran, which have, due to sanctions, resulted in severe inflationary pressures, systematic risks in the market have increased, and uncertainty about the future has intensified. In such an environment, investors require reliable information beyond financial statements in order to make informed decisions regarding participation in the capital market. Management’s Discussion and Analysis (MD&A) represents one of the appropriate reporting tools through which an adequate level of transparency can be established in the capital market, thereby facilitating the channeling of liquidity toward this market. In this regard, auditing MD&A is of particular importance for enhancing its reliability. However, the inherent complexity and the qualitative and interpretive nature of MD&A pose significant challenges for auditors. One of the main challenges in auditing MD&A is the absence of clear and globally accepted auditing frameworks and standards. At present, independent auditors do not provide any assurance on MD&A and merely read these reports for the purpose of identifying potential material inconsistencies with the financial statements. Consequently, under the existing practice, the manner in which credibility is attributed to MD&A is ambiguous, and it is unclear who would be held accountable in the event of material misstatements in these reports. Accordingly, the present study first seeks to identify the existing ambiguities in the current practice of auditing MD&A and the consequences arising from these ambiguities. In the next stage, it aims to identify appropriate strategies, as well as the necessary infrastructures, to eliminate the existing ambiguities and their associated consequences. The research questions addressed in this study are as follows:
What ambiguities exist in the current practice of auditing MD&A?
What are the consequences of the existing ambiguities in the current practice of auditing MD&A?
What strategies can be adopted to resolve the ambiguities in the current practice of auditing MD&A?
What infrastructures are required to improve the process of auditing MD&A by independent auditors?
Literature Review
Overall, prior studies conducted in the area of auditing Management’s Discussion and Analysis (MD&A) have primarily emphasized the importance of auditing MD&A in enhancing the credibility of these reports, users’ demand for auditors’ opinions and assurance on MD&A, as well as the influence of auditors on the tone of MD&A. In addition, several studies have examined the relationship between the quality of MD&A and auditors’ efforts in auditing these reports, as well as audit fees. Moreover, some studies have focused on the role of the audit committee in the preparation of MD&A and have concluded that the presence of a knowledgeable and expert audit committee contributes to improving the quality of MD&A auditing.
Methodology
The present study was conducted using the grounded theory methodology through interviews with 24 experts from the auditing profession, capital market analysts, managers of listed companies, and specialists from the regulatory authority. The initial interviewee was selected through theoretical sampling, based on their recognized contributions and viewpoints in the subject area of the study. Subsequently, the sample was expanded for later interviews using the snowball sampling technique. The research data were analyzed using open, axial, and selective coding. This process resulted in the development of a coherent and applicable theory regarding the existing ambiguities in the practice of auditing Management’s Discussion and Analysis (MD&A) in Iran and the strategies for addressing them, which can be utilized in both academic and practical contexts.
Results
Based on the research findings, the ambiguities identified in the current practice of auditing Management’s Discussion and Analysis (MD&A) include the level of the auditor’s responsibility with respect to MD&A, the auditor’s opinion on MD&A in the context of interim financial statements, and the auditor’s examination of forward-looking information disclosed in MD&A. The principal strategies identified to address these ambiguities include: eliminating forward-looking information from MD&A; entering into a separate engagement and paying a distinct audit fee to the auditor for providing an opinion on MD&A; refraining from expressing an auditor’s opinion on MD&A in relation to interim financial statements or, alternatively, expressing an opinion in accordance with the procedures applied in review engagements; and providing assurance on the forward-looking information disclosed in MD&A in accordance with Auditing Standard 3400.
Discussion
With respect to the auditor’s responsibility for Management’s Discussion and Analysis (MD&A) and the corresponding strategies, two distinct perspectives emerged among the experts. One group of interviewees believes that the auditor bears no responsibility for MD&A or for any potential material misstatements therein, and that the auditor’s role should be limited to reading MD&A solely in connection with the primary responsibility of auditing the financial statements and reconciling the information disclosed in MD&A with the financial statements. This group argues that, under the current circumstances, the appropriate strategy for auditing MD&A is for the independent auditor to refrain from accepting any responsibility with respect to these reports. Furthermore, independent auditors, according to this viewpoint, should neither enter into separate engagements nor receive separate fees for procedures related to MD&A. In contrast, another group of interviewees contends that, given the guidance issued by the Securities and Exchange Organization regarding the auditing of MD&A and the paragraph included in the auditor’s report pursuant to such guidance, the independent auditor does bear responsibility for MD&A. This is because the auditor’s report is subject to public interpretation, and the inclusion of this paragraph leads users to infer that the auditor’s opinion on the financial statements extends to MD&A as well, thereby implying that assurance has also been provided on this report. Accordingly, the appropriate strategy from this perspective is for the independent auditor to become formally involved in the auditing of MD&A, to enter into separate audit engagements for MD&A, and to receive a separate fee for auditing these reports.
Conclusion
It appears that, given that the independent auditor’s report is closely examined by market stakeholders and users of financial information, the auditor bears responsibility for Management’s Discussion and Analysis (MD&A) through the paragraph included in the “Other Information” section of the auditor’s report. Moreover, pursuant to paragraph T-32 of Auditing Standard 720, specific responsibilities are assigned to the independent auditor in relation to other information, to the extent that, if the auditor is unable to conclude that no material inconsistency exists in the other information or that no material misstatement is present therein, withdrawal from the audit engagement—where permitted by laws or regulations—is recommended. In addition, the auditor’s ethical and professional responsibilities require that the auditor not remain indifferent to misstatements or deviations in financial reporting, including those in MD&A, that may mislead users of financial information, and that the auditor fulfill their credibility-enhancing role with respect to the information disclosed in such reports. Therefore, if—based on these arguments—the independent auditor’s responsibility for MD&A, as one of the key reports communicated to the market, is acknowledged, the auditor’s risk in fulfilling their assurance responsibilities over financial information increases. Consequently, it is reasonable to consider the execution of separate engagement contracts and the payment of separate audit fees to independent auditors for the examination of MD&A.
Financial audit
Marzieh Tohidinejad; Elnaz Rezaei
Abstract
Given the regulatory requirement to publish unaudited annual financial statements before the audited versions in Iran's capital market and the significant discrepancies between the two, this study examines the interactive effect of investors' experience and changes in post-audit net income on the perceived ...
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Given the regulatory requirement to publish unaudited annual financial statements before the audited versions in Iran's capital market and the significant discrepancies between the two, this study examines the interactive effect of investors' experience and changes in post-audit net income on the perceived credibility of three key pillars of financial reporting (audited financial statements, management, and independent auditors). A 2×2 between-subjects experimental design (investment experience: low/high; income change: increase/decrease) was employed, with 119 finance graduates as investor participants. Data were collected via an online questionnaire in August 2024 and analyzed using rank ANOVA in SPSS-24. Results reveal that investors with low experience, reacting to a post-audit decline in net income, assign lower credibility to audited financial statements and independent auditors, whereas experienced investors remain unaffected by such changes. Notably, regardless of experience level or income change, investors consistently rated managers’ credibility lower than that of auditors. These findings underscore the need for investor education and enhanced audit process transparency to mitigate perceptual gaps across investor groups.
Introduction
This study investigates how discrepancies between unaudited and audited financial statements—specifically, changes in net income following the audit process—influence the credibility assessments of investors with varying levels of investment experience. According to the executive bylaws of the Tehran Stock Exchange (since 2007), listed companies are mandated to disclose unaudited annual financial statements within 60 days of their fiscal year-end. However, the release of audited statements can be delayed until 110 days after the year-end. This dual-disclosure framework creates a unique informational environment. The early release of unaudited statements enhances transparency and mitigates information asymmetry by providing stakeholders with preliminary financial data. Conversely, the subsequent audited version offers a more reliable representation of the company's financial status. While this process aims to ensure a continuous information flow to the market, the existence of material differences between the two versions can pose significant challenges for investors. This research focuses on how these post-audit income changes affect investors' perceptions of the credibility of three pillars of financial reporting: company management, the independent auditor, and the audited financial statements. Understanding these dynamics is crucial for evaluating the effectiveness of current disclosure policies and for developing measures to enhance market efficiency and protect investor interests.
Literature Review
This research is grounded in the tension between rational-assurance theory and cognitive psychology. The rational perspective posits that audited financial statements inherently possess higher credibility than unaudited versions, and thus, post-audit adjustments should not diminish their perceived credibility (Hodge, 2001; Libby, 1979; Mercer, 2004). Conversely, cognitive psychology, through the lens of negativity bias, predicts that investors weigh negative information more heavily, meaning that a post-audit earnings decrease could damage the credibility of the final financial statements (Baumeister et al., 2001; Pratto & John, 1991). This effect is compounded by investors' tendency to integrate audited and unaudited information (Hodge, 2001). A key moderating factor is investor experience. Experienced investors, shaped by adaptive market learning (Lo, 2004), typically develop a better ability to control emotional reactions to negative news (Gervais & Odean, 2001). Novice investors, however, are more susceptible to cognitive biases. Furthermore, the self-serving attribution theory (Heider, 1958) explains how investors assign blame: novices are more likely to attribute negative outcomes (like an earnings decrease) externally to management or the auditor, while experienced investors may make more internal attributions (Gervais & Odean, 2001; Dhar & Zhu, 2006). Based on this framework, the study tests the following hypotheses:
H1: A decrease in post-audit net income reduces the credibility of audited financial statements more for novice investors than for experienced investors.
H2: Novice investors will assign lower credibility to audited financial statements following a decrease in post-audit net income compared to an increase.
H3: A decrease in post-audit net income reduces the credibility of company management more for novice investors than for experienced investors.
H4: Novice investors will assign lower credibility to company management following a decrease in post-audit net income compared to an increase.
H5: A decrease in post-audit net income reduces the credibility of the independent auditor more for novice investors than for experienced investors.
H6: Novice investors will assign lower credibility to the independent auditor following a decrease in post-audit net income compared to an increase.
Research Methodology
This experimental study employed a 2x2 between-subjects design to investigate how investment experience (inexperienced/experienced) and post-audit net income changes (12% increase/decrease) influence investors' credibility judgments. Using an online questionnaire, 119 finance graduates, recruited via LinkedIn, were randomly assigned to one of four conditions. Participants, acting as current investors in a hypothetical firm, reviewed unaudited and subsequently manipulated audited financial statements. Their assessments of the credibility of the audited statements, company management, and the independent auditor were then measured using validated Likert scales, with data analyzed using rank-based ANOVA to ensure robustness.
Results and Discussions
The results revealed a significant interaction effect between investor experience and post-audit income change on the perceived credibility of audited financial statements (F = 9.413, p<0.01). As hypothesized, novice investors significantly downgraded their credibility assessment when faced with a 12% decrease in post-audit income (Mean = 6.15) compared to an increase (Mean = 7.97, p<0.01), while experienced investors' judgments remained stable (Mean = 7.88 vs. 7.41, p=0.368), confirming that experience mitigates negativity bias. For auditor credibility, a similar pattern emerged: novices assigned significantly lower credibility to auditors following an income decrease compared to experienced investors (Mean = 6.72 vs. 7.52, p = 0.035), aligning with self-serving attribution theory, where novices externalize blame. Conversely, the credibility assessments of company management were unaffected by either experience or income change, suggesting a persistent, underlying distrust in management among all investors, regardless of experimental conditions.
Conclusions
This study demonstrates that investor experience critically moderates reactions to discrepancies between unaudited and audited net income. Novice investors, influenced by negativity bias, significantly downgraded their credibility assessments of both audited financial statements and the independent auditor following a post-audit net income decrease, while experienced investors' judgments remained stable. This aligns with cognitive theories in which novices disproportionately externalize blame for negative outcomes. Notably, the credibility of company management remained persistently low across all conditions, indicating a deep-seated, structural distrust in management that is unaffected by positive news or investor sophistication. These findings highlight a vulnerability among retail investors in emerging markets like Iran, where the mandatory early release of unaudited statements can lead to significant reassessments upon audit completion. For regulators and standard-setters, this underscores the need for enhanced investor education and potentially revised disclosure timelines to mitigate the cognitive biases uncovered. Future research should explore different magnitudes of earnings adjustments and incorporate varied auditor opinion types to further generalize these findings.
Accounting report
Yasser Rezaei Pitenoei
Abstract
Corporate sustainability represents a modern approach in business management that aims to create sustainable and long-term value for all stakeholder groups. Accordingly, the purpose of this research is to investigate the relationship between sustainability reporting and trade credit financing in companies ...
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Corporate sustainability represents a modern approach in business management that aims to create sustainable and long-term value for all stakeholder groups. Accordingly, the purpose of this research is to investigate the relationship between sustainability reporting and trade credit financing in companies listed on the Tehran Stock Exchange. The hypothesis of this study has been tested using a sample of 134 active companies on the Tehran Stock Exchange during the years 2020 to 2024, employing a multivariate regression model based on panel data. The results of testing the research hypothesis indicate that sustainability reporting has a positive and significant impact on trade credit financing; meaning that as sustainability reporting disclosure increases, trade credit financing also increases. Regarding the acceptance of the research hypothesis, it can be argued that disclosing information about economic, environmental, social, and corporate governance performance increases investor confidence, subsequently reducing information asymmetry and improving the company's information environment. Sustainability reporting can reduce the company's information and operational risk, thereby increasing the amount of financing obtained through trade credit. Sustainability reporting demonstrates the company's commitment to the future and business sustainability; therefore, suppliers are more willing to engage in long-term cooperation and grant better credit terms.
Introduction
Corporate sustainability represents a distinct approach to business in which organizations create long-term value for all their stakeholders. Accordingly, the purpose of this study is to examine whether, and in what way, corporate sustainability reporting influences trade credit financing. The underlying assumption is that suppliers may perceive a firm’s sustainability performance as an indicator of sustainable development, thereby showing greater willingness to invest in such firms and making more favorable financing decisions. Corporate sustainability reporting can reduce both informational and operational risks, which in turn may enhance the level of financing obtained through trade credit. The novelty of this research lies in its extension of the factors that affect trade credit.
Method
This study is classified as applied research in terms of its objective and has been conducted using a library-based data collection method. For the analysis, multiple regression techniques have been employed. The statistical population consists of companies listed on the Tehran Stock Exchange during the period from 2020 to 2024 (1399–1403 in the Iranian calendar). The sample selection was restricted to firms that met the following criteria:
They were admitted to the Tehran Stock Exchange prior to 2020 and remained listed until the end of 2024.
Their fiscal year ends in March (Esfand).
They did not undergo any changes in their line of business or fiscal year during the study period.
They are not classified as investment companies or financial intermediaries, since, due to the distinct nature of their activities, such firms were excluded from the research population.
Thus, the research hypothesis was tested using a sample of 134 active firms listed on the Tehran Stock Exchange during the years 2020–2024. A multivariate regression model based on panel data was employed. In terms of purpose, this study is applied research, and in terms of inference method and research design, it falls within the category of descriptive-analytical studies of a correlational and ex post facto nature.
Findings
The examination of the F-statistic and its significance level indicates that the fitted regression model is valid at the 5 percent significance level. Based on the adjusted coefficient of determination, it can be stated that approximately 59 percent of the variations in firms’ trade credit are explained by the independent and control variables of the model. As shown in the results table, the estimated coefficient and the t-statistic for the sustainability reporting variable (SUSR) are positive and statistically significant at the 5 percent level, confirming a positive and significant relationship between sustainability reporting and trade credit. Furthermore, the analysis of the relationship between firm size (Size) and trade credit reveals a significance level below 0.05 and a positive estimated coefficient, suggesting a positive association between company size and trade credit. On the other hand, the relationship between leverage (Lev) and trade credit is found to be significantly negative, indicating that higher financial leverage reduces firms’ access to trade credit. Based on this evidence, the null hypothesis (H0) is rejected, and the research hypothesis is supported. In an additional test, the relationship between sustainability reporting and trade credit was examined separately for each of the five years of the study period. The results show that the coefficient of this variable is positive in all years; however, in the early years of the study, the level of significance was relatively low. This finding suggests that in more recent years, given the link between sustainability reporting and financial performance, the importance and attention paid to evaluating such disclosures by firms have increased considerably.
Conclusion
Acceptance of the research hypothesis can be explained by the fact that disclosing information on economic, environmental, social, and corporate governance performance enhances investor confidence, thereby reducing information asymmetry and improving the firm’s information environment. Sustainability reporting can reduce both informational and operational risks, which in turn increases the level of financing through trade credit. Moreover, sustainability reporting signals a company’s commitment to the future and to the sustainability of its business, encouraging suppliers to engage in long-term cooperation and to offer more favorable credit terms.
Contribution
In line with the country’s overarching approach to sustainable development, and within the framework of the Constitution, the general policies of the Vision 2025 Document, and the objectives of the Seventh National Development Plan (2024–2028 / 1403–1407), policymakers have emphasized the importance of ensuring stability and sustainability in commercial activities, controlling liquidity, and enhancing transparency in the financial and banking system. In this regard, reliance on empirical studies and evidence-based analyses is essential, as such an approach enables a deeper understanding of sustainability requirements and provides the foundation for improving the sustainable performance of Iranian companies and enhancing their competitiveness at both national and international levels.
Aylin Rahmani Esbagrani; Farzaneh Heydarpoor; Zahra Poorzamani
Abstract
Reducing undesirable behavioral biases of managers and investors is one of the basic challenges in financial markets that can have significant effects on the quality of decisions and the efficiency of capital markets. Behavioral biases such as over-optimism, fear of loss, and emotional influences can ...
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Reducing undesirable behavioral biases of managers and investors is one of the basic challenges in financial markets that can have significant effects on the quality of decisions and the efficiency of capital markets. Behavioral biases such as over-optimism, fear of loss, and emotional influences can lead to irrational decisions and market anomalies that ultimately negatively affect economic performance and financial markets. Although behavioral biases are not always detrimental for instance, optimism, which constitutes a component of overconfidence bias, can have positive outcomes for firms with optimistic managers, such as improving financial performance and enhancing earnings predictability. the literature predominantly emphasizes their adverse effects. In this research, the aim is to identify the factors affecting the behavioral biases of managers and investors. using a qualitative grounded theory approach under an interpretive paradigm The statistical population in this research includes 15 accounting and financial experts who were selected in a purposeful (judgmental) and (snowball) manner and were interviewed with a semi-structured interview tool until saturation was reached. The output of this stage included 10 secondary themes, which led to 4 organizing themes of "motivational factors", "personality factors", "factors related to self-confidence and competence" and "cognitive and attitudinal factors" for the theme of behavioral biases. A comparative analysis of the data indicated that while some factors affecting the reduction of behavioral biases are shared between managers and investors, their origins and intensities differ. For managers, strategic decision pressures, accountability responsibilities, and managerial overconfidence were identified as major sources of bias, whereas for investors, loss aversion, herding behavior, and framing effects were more pronounced. Accordingly, the study suggests that educational and policy interventions aimed at reducing behavioral biases should be designed separately for these two groups to enhance their effectiveness.
Introduction
Behavioral biases represent fundamental challenges in financial markets, significantly affecting decision-making quality and capital market efficiency. These biases, including overconfidence, loss aversion, and emotional influences, lead to irrational decisions and market anomalies that negatively impact economic performance. While behavioral finance has grown substantially as a field combining psychology and social sciences, a significant gap remains in understanding the specific mechanisms through which these biases can be reduced, particularly in the Iranian context. Most existing research has focused on identifying biases rather than developing practical frameworks for their mitigation. Furthermore, while managers and investors both experience behavioral biases, the contextual differences in how these biases manifest remain underexplored. Managers operate within organizational governance frameworks with stakeholder accountability, while investors are primarily influenced by market volatility and public information. This research employs a qualitative grounded theory approach to identify and explain factors influencing the reduction of behavioral biases among both groups in Iran’s capital market.
Theoretical Framework
Behavioral finance challenges traditional assumptions of rational actors with complete information, emphasizing that financial decisions are influenced by emotions, biases, and cognitive errors. Since the 1980s, particularly following Kahneman and Tversky’s Prospect Theory, the field has demonstrated fundamental shifts in understanding investor behavior. Behavioral biases fall into two categories: cognitive biases (confirmation bias, anchoring) are more amenable to correction through education and structured feedback, while emotional biases require regulation of decision-making conditions and emotional responses. While the literature has focused on individual investor biases, managerial biases such as CEO overconfidence and loss aversion directly impact corporate decisions. Research shows that although biases in managers and investors occur in different contexts, common psychological foundations influence both groups. Managers primarily suffer from biases under organizational pressures and stakeholder expectations, while investors are more influenced by market volatility and herding behavior.
Research Questions
The main research question is: What factors lead to the reduction of behavioral biases in managers and investors in Iran’s capital market?
Sub-questions include:
What motivational factors influence the reduction of behavioral biases in managers and investors?
What cognitive and attitudinal factors play a role in reducing behavioral biases?
What personality traits can help reduce behavioral biases?
How do self-confidence and individual competencies affect the reduction of behavioral biases?
What differences exist in the origin, mechanism, and intensity of behavioral biases between managers and investors?
Methodology
This exploratory qualitative research employed an interpretive paradigm and grounded theory methodology to understand the subjective experiences of managers and investors. Semi-structured interviews lasting 45-60 minutes were conducted with 15 experts (7 managers and 8 active investors) selected through purposive and snowball sampling until theoretical saturation was reached. Data were analyzed using Braun and Clarke’s (2006) thematic analysis with MAXQDA 2020. Initially, 98 primary codes were extracted and reduced to 54 final codes, organized into 10 sub-themes, and ultimately grouped into 4 organizing themes. Independent coding by a domain expert achieved 87% agreement, confirming data reliability. Data from both groups were analyzed separately, then compared to identify comprehensive patterns.
Findings
Analysis revealed four main organizing themes: motivational factors, personality factors, self-confidence and competence factors, and cognitive and attitudinal factors.
Motivational Factors: Goal-oriented motivations enable better rational decision-making. Among managers, motivation to maintain professional credibility deterred hasty decisions. Among investors, motivation for short-term returns could both lead to bias and, with proper education, result in financial discipline.
Cognitive and Attitudinal Factors: Evidence-based attitudes help prevent cognitive biases. Managers’ cognitive biases typically arises from incomplete internal data and excessive emphasis on performance indicators. Investors showed weakness in understanding risk-return ratios and susceptibility to news and social networks. Attitudes toward markets and acceptance of uncertainty were key components in reducing biases.
Personality Factors: Traits like adaptability, neuroticism, and extraversion significantly influence risk-taking. Managers with higher extraversion and adaptability showed better cognitive resistance to decision pressures and less confirmation bias. Investors with high neuroticism showed a greater tendency toward herding behavior during market volatility, consistent with previous research findings.
Self-Confidence and Competence: Financial literacy and accurate data analysis help prevent incorrect decisions. Among managers, excessive self-confidence stems from experience and leads to an “illusion of control.” Among investors, it results from incorrect market analysis, misinterpretation, or past successes. Behavioral training and continuous feedback can moderate this bias in both groups.
Comparative analysis revealed that while the four main themes are common, their manifestation mechanisms differ. Manager-specific themes included strategic decision pressure, illusion of control, and organizational accountability. Investor themes of loss aversion, herding behavior, and framing effects were more prominent. Common themes included financial literacy, emotional intelligence, and structured feedback, which were significantly associated with reduced behavioral biases. Results indicate that factors affecting bias reduction have a two-level structure: cognitive-emotional (individual) and structural-organizational (environmental).
Discussion and Conclusion
Findings indicate that motivational, cognitive, attitudinal, and personality factors play important roles in bias emergence and reduction. Short-term motivations can lead to biases like overconfidence or loss aversion, necessitating a focus on long-term goals and aligning rewards with actual results. Accurate economic analysis and business intelligence tools reduce confirmation bias effects. Personality traits such as conscientiousness, adaptability, and emotional control prove effective in complex decision-making. Emotional intelligence’s role in managing emotions during market fluctuations is critical for controlling biases.
Financial literacy and managed self-confidence are crucial. Individuals with high financial literacy can better analyze market information and avoid emotional decisions. Strengthening financial literacy through simulation-based training is among the most effective tools for correcting behavioral biases. Structured feedback and organizational learning through transparent decision-making environments help reduce errors in both groups. Excessive managerial self-confidence and market-oriented investor emotions are the two main sources of behavioral biases requiring specific educational interventions.
Comparative analysis between managers and investors revealed that although the overall structure of influential factors is similar, their origin, mechanism, and impact intensity differ. For managers, strategic decision pressure, accountability requirements, and professional credibility maintenance are primary sources of cognitive and emotional biases. Among investors, market emotions, loss aversion, and herding behavior play more prominent roles in creating behavioral deviations. This fundamental difference highlights the necessity of developing separate educational programs and corrective policies for each group.
Practical Implications
For Managers: Develop financial analysis and emotion management training programs; create an organizational culture based on long-term goal setting; implement balanced reward systems that avoid short-term decision encouragement; utilize group consultation to reduce individual biases.
For Investors: Increase financial literacy through specialized training; use data-based analytical tools; strengthen emotional intelligence to control emotional reactions to market fluctuations; set specific investment goals with clear time horizons.
For Regulatory Bodies: Design public education programs in behavioral finance; create warning tools for identifying herding behaviors; strengthen market information transparency; develop AI-based decision support systems.
Creating an organizational culture based on long-term goal setting, decision transparency, and reliance on data-driven analyses is a key step in reducing behavioral biases and increasing capital market efficiency.
Limitations and Future Research
This research included 15 experts, which was sufficient for theoretical saturation but requires caution in generalizing the results. The qualitative approach facilitates a deeper understanding of the phenomenon but does not allow quantitative testing of relationships. Future research could employ quantitative approaches to test the presented conceptual model and measure each identified factor’s impact on reducing behavioral biases. Examining variables such as organizational culture, financial experience, and learning orientation in relation to managerial biases could provide new research avenues.
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