Empirical Studies in Financial Accounting

Abstract In this research, we examine the value relevance of accounting information over the time in order to use it in valuation models. For this reason, the ability of current operating Income to predict one­year-ahead operating cash flows has been examined by means of annual cross-sectional regression approach from 1378 to 1385. Then the degree of relationship between operating Income and operating cash flows is investigated.  The results show that both operating Income and operating cash flows have the ability to predict one-year­ ahead operating cash flows. But the incremental explanatory power of operating Income over operating cash flows is significant. Then in order to test the value relevance of accounting information over the time, we investigate the relationship between R²ₑ , R² inc-e, R² ocf, R² inc-ocf, and lime by means  of nonparametric statistics. The results do not show any significant relationship between  R²ₑ , R² inc-e, R² ocf, R² inc-ocf and time ROI t  - ROI t-1.

Abstract Different information introduced to the market by the listed companies affect share prices in the capital market. Some are used for forecasting and estimation, so its credibility and authenticity is under question. A major problem almost all managers are facing with is that to what degree their earnings forecast is reliable to the capital market, how they are affected by different variables, and how authenticity can be augmented. This article empirically tries to investigate the effect of the factors reviewed by foreign scholars, on Tehran Stock Exchange. The research hypotheses are based on evaluating five factors including   type   of information (positive or negative), deviation in forecasting (managers credibility), forecast timing, size of the companies, and adjustment or non-adjustment of the forecasted information. Considering the volatility of the share price at the time of projected profit declared by the negative information (a lower forecasted earning) severely makes share price sensitive; unlike positive information which does no draw  as much attention of shareholders and brokers as the negative information. Secondly, the size of the listed companies has a wider effect on the investors to accept the projected profit. Thirdly, the materialization of the past forecasts affects acceptance of the future forecasts as well. Fourth, medium-term forecasts values more reaction on share prices rather than the long-term ones. And finally adjustment of the forecasts has no effect on the upcoming forecasts. In short, this study tries to raise the awareness concerning how managers can link their projected future profits to the market.

Abstract The   major   aim   of   this   research   is   to   study   the   auditor's independence From Iranian certified Accountant’s point of view. The result of this study indicates that Factors such as non-audit services and auditor economic dependence to a client decrease auditor’s independence.

Abstract One aim of investors in the purchasing of company stocks is using from the dividends. Investors enjoy from the cash flow and want to receive assure for particular amounts in the determine time, on the other hand, dividends payout can indicate the financial healthy and suitable condition of company for investors. So companies can use this weapon in their sharing price and also guiding the investors. The aim of this research is the consideration of the payment dividends balance dependent with the company operation of two assessment equivalent including the economic value added and return on assets. In order to consider the subject of 88 companies  select that was necessary to account the research variables and the suitable statistic testing perform like the correlation tests, This research results is that the dividends has weak cohesion with economic value added  and it has no cohesion relation with return on assets. Therefore, we can conclude that payment or nonpayment of dividends cannot indicate the  suitable or unsuitable operation of company and increasing or decreasing of dividends also should not be indicate for fairness or unfairness investment in the  company ,so utilization of dividends don't recommend to take the investment and credit decisions by investors and creditors.  

Abstract Despite information asymmetry between auditor and client that may result in adverse selection (undesirable client acceptance), auditor should evaluate all phases of audit engagement before establishing any relationship with prospective client. This is due to the fact that, the prospective clients that a firm accepts ultimately determine the nature of the firm's evolving client portfolio and as a result they affect the engagement quality. Professional standards state that firms should establish procedures for making the client acceptance decision. However, no guidance is provided about factors that should be considered in making the decision. Results of this research show that audit firms consider audit risk factors and auditor business risk factors at the time of biding to firm for perform audit services and thus making decision about prospective client. Finding of this study indicate that personnel assignment, as a risk management strategy, affects client acceptance decisions.

Abstract The present study empirically examines the explanatory power of portfolio returns by Fama and French three-factor model (including systematic risk of portfolio, size of portfolio and book-to-market value of portfolio) in Tehran Stock Exchange (TSE). This study is to answer the question that whether the three factors of Fama and French model are able to explain returns of portfolios in Tehran Stock Exchange with its special economic conditions or not. Furthermore, there is a comparison between the results of Fama and French model and CAPM. The importance of this empirical research is how it helps to do accurate and complete calculations for the best investment decision making. The shares data have been obtained from Tehran Stock Exchange for the financial years 1378 to 1382 (from zo" of March 1999 till 20^th of March 2003). At the beginning of each year, sample stocks are divided into six portfolios based on their size and book-to-market value and the empirical test has been done for these six portfolios. The results of examining the empirical evidence show that there is no significant relationship between systematic risk (Beta) and return of portfolios. But the considerable relationship bears between the size and return of BIH portfolio (portfolio with Big size and High book-to­ market value). This result repeats itself between book-to-market value and return of BIH portfolio. We have tested all three Fama and French factors together and the model explains portfolio returns in both S/H (Small size and High book-to-market value) and BIM (Big size and Medium book-to-market value) portfolios. The empirical results, as a whole, confirm that Fama and French three-factor model has greater explanatory power of stock returns in comparison with CAPM in Tehran Stock Exchange.