Empirical Studies in Financial Accounting

Abstract According to Prospect Theory, Investors have different behaviors in the
profit and loss situations and indeed their trading behavior is different in bull
and bear markets. This study uses quantile regression model (in different
quartiles) and OLS model to estimate beta of 180 firms. Results showed that
first, equity total risk (standard deviation) increase in Upper quartile and
second, stocks beta changes in different quartiles and by moving from
quartile 0.25 to quartile 0.75, systematic risk (beta) increases significantly.
Linear regression model and Quantile regression model show also that
unexpected variance can explain excess return at least similar to expected
variance. The results can also be interpreted with both Insight of standard
finance and insight of behavioral finance. In standard finance area, riskreturn
positive relation that exists in upper quintiles is consistent with long
run growth of economy. Moreover, negative relation between return and risk
in lower quintiles imply more uncertainty and as a result causing stock
returns to fall. In behavioral finance area, regime-dependent behavior of
slope coefficients is consistent with prediction of Prospect theory of
investor’s behaviors around the reference point.

Abstract The purpose of this study is investigation of the type and information content of accounting adjustments of Firms Listed in the Tehran Stock Exchange (TSE). In this regard, in order to measure the information content of accounting adjustments, the mean cumulative abnormal returns before and after the information has been released. The data used, has been extracted from firms listed in the Tehran Stock Exchange (TSE) in the period 1380-1389. A paired comparison test is used for testing of hypotheses and data analyses. The results of the present study showed that there accountings adjustments have been information content to capital markets and the market shows negative reaction to the accounting adjustments. Also, results showed that the Iran capital market shows a negative reaction to accounting adjustment of errors kinds accounting, income and costs transfers; So that the difference in average abnormal returns for these adjustments were %3/41, %3/44 and %4/52. In addition, the results showed that the cumulative abnormal returns before and after the publication of information on the accounting adjustment of type positive accounting errors, there is not a significant correlation, Therefore, we cannot determine that the market reacts to such adjustments or not. In other words, the capital market show not is interpreting reaction to accounting adjustments of positive accounting errors.

Abstract The speed of transferring of accounting information from
transferors to users is so important that it is mentioned in accounting
conceptual framework as a qualitative characteristics of accounting
information. Barriers and problems discovering in information
channel between transferors and users not only can Accelerates the
transmission of information but also can benefit users more. In this
research we investigate the relationship between disclosure quality
and audit report lag for 164 companies of Tehran Stock Exchange
between the years of 1387 to 1391. We use disclosure quality ranking,
management forecast error and prior period adjustments as the
representatives of disclosure quality and test them with audit report
lag in E views and SPSS software. The findings of panel analysis
shows that there is a significant negative relationship between audit
report lag and dependent variables, management forecast error and
prior period adjustments. The final result shows a positive relationship
between disclosure quality and audit report lag. Furthermore there is
significant negative relationship between company size and audit
report lag and there is no relationship between auditor sizes, having
good news or bad news and company debts with audit report lag

Abstract In this study ,the impact of highly valued equity on the relation
between audit quality and Discretionary Accruals in the companies
listed in Tehran Stock Exchange is investigated .Audit quality is
measured by using of the audit firm size, audit industry specialization,
the length of the auditor-client relationship and industry specialist
audit firms with long tenure. Also, Discretionary Accruals is estimated
using the Jones model (1991). The results of investigating a sample of
153 firms during the years of 1386 to 1392 shows that interaction
effect of highly valued equity and audit quality proxies is positive and
significant. This means that, magnitude of the negative effect of audit
quality on the discretionary accruals in the highly valued firms
decreases and high quality auditors not reducing amount of
Discretionary Accruals in highly valued firms. Thus, in the
negotiation between auditors and managers about preparation of
financial statement in the highly valued equity, managers by using of
better information about its firm can success on auditors.

Abstract This paper investigates the relation between fraudulent financial
reporting and firms’ dividend policies. Specifically, this research
concentrated on situations that it is possible to classify financial
restatement into fraudulent and non-fraudulent based on the
management’s incentives for discretionary accounting choices .
The data is related to 247 firms (consisted of 2,238 firm-year
observation) during 1381-1390. A Meet-or-beat model was used to
classify firms as making discretionary accounting choices for
opportunistic meet-or-beat. Furthermore, a fixed effects logistic
regression with panel data was used to test hypothesis. Results show
that dividend-paying firms have less likelihood to engage in
fraudulent financial reporting furthermore, the negative association
between dividend paying status and fraudulent financial reporting is
stronger when the size of dividend payouts is larger .Overall, results
suggest firm’s dividend policy is indicative of its earnings quality.
Specifically, dividend policy unfolds the manager’s incentives for
financial restatements.

Abstract The aim of this research is to find out whether Related Parties Transactions can produce a meaningful influence on the agency cost or not. To answer this question two definitions of agency cost are employed: Tobin’s Q Ratio and mutual relationship between the chance of development and free cash flow. Having these two definitions in mind we studied the effects of transactions with Related Parties on the agency cost. We studied 55 companies involved in Tehran Stock market Exchange (TSE)
The results show that when we measure the agency cost using Tobin’s Q Ratio, the effect of the transactions with Related Parties on the agency costs is positive and meaningful but when the second measurement that is, the relationship between the chance for development and the free cash flow, is applied the influence is not meaningful. The findings show that Related Parties Transactions is in accordance with conflict of interest theory, this means that transactions can reinforce the opportunistic behavior of the managers, result in the destruction of the interest and disadvantage the owners.

Abstract The speed of transferring of accounting information from transferors to users is so important that it is mentioned in accounting conceptual framework as a qualitative characteristics of accounting information. Barriers and problems discovering in information channel between transferors and users not only can Accelerates the transmission of information but also can benefit users more. In this research we investigate the relationship between disclosure quality and audit report lag for 164 companies of Tehran Stock Exchange between the years of 1387 to 1391. We use disclosure quality ranking, management forecast error and prior period adjustments as the representatives of disclosure quality and test them with audit report lag in Eviews and SPSS software. The findings of panel analysis shows that there is a significant negative relationship between audit report lag and dependent variables, management forecast error and prior period adjustments. The final result shows a positive relationship between disclosure quality and audit report lag. Furthermore there is significant negative relationship between company size and audit report lag and there is no relationship between auditor sizes, having good news or bad news and company debts with audit report lag.

Abstract While perior studies faild to document a meaningful relationship between financial restatement, as a measure of earnings quality, and firms’ dividend paying policy, the purpose of the present study is to reinvestigate this relationship by classifying financial restatements into opportunistic and non-opportunistic based on management incentives in using discretionary accruals. The data is related to 247 firms (consisted of 2,238 firm-year observations) during 1381-1390. A Meet-or-beat model was applied to determine opportunistic financial reporting. Furthermore, a fixed effects logistic regression with panel data was used to test hypothesis. Results show that dividend-paying firms have less likelihood to engage in opportunistic financial reporting through fincial restatements. Furthermore, the negative association between dividend paying status and opportunistic financial reporting is stronger when the size of dividend payouts are larger. Overall, results suggest firm’s dividend policy is indicative of its earnings quality. Specifically, dividend policy unfolds the manager’s incentives behind the financial restatements.

Abstract According to Prospect Theory, Investors have different behaviors in the profit and loss situations and indeed their trading behavior is different in bull and bear markets. This study uses quantile regression model (in different quartiles) and OLS model to estimate beta of 180 firms. Results showed that first, equity total risk (standard deviation) increase in Upper quartile and second, stocks beta changes in different quartiles and by moving from quartile 0.25 to quartile0.75, systematic risk (beta) increases significantly. Linear regression model and Quantile regression model show also that unexpected variance can explain excess return at least similar to expected variance. The results can also be interpreted with both Insight of standard finance and insight of behavioral finance. In standard finance area, risk-return positive relation that exists in upper quintiles is consistent with long run growth of economy. Moreover, negative relation between return and risk in lower quintiles imply more uncertainty and as a result causing stock returns to fall. In behavioral finance area, regime-dependent behavior of slope coefficients is consistent with prediction of Prospect theory of investor’s behaviors around the reference point.

Abstract In this study ,the impact of highly valued equity on the relation between audit quality and Discretionary Accruals in the companies listed in Tehran Stock Exchange is investigated .Audit quality is measured by using of the audit firm size, audit industry specialization, the length of the auditor-client relationship and industry specialist audit firms with long tenure. Also, Discretionary Accruals is estimated using the Jones model (1991). The results of investigating a sample of 153 firms during the years of 1386 to 1392 shows that interaction effect of highly valued equity and audit quality proxies is positive and significant. This means that, magnitude of the negative effect of audit quality on the discretionary accruals in the highly valued firms decreases and high quality auditors not reducing amount of Discretionary Accruals in highly valued firms. Thus, in the negotiation between auditors and managers about preparation of financial statement in the highly valued equity, managers by using of better information about its firm can success on auditors.