Empirical Studies in Financial Accounting

Abstract This paper examines the relation between the quality of financial reporting, information risk and cost of capital for a sample of firms listed in TSE's during 1380-1384.Using accruals quality as a proxy for financial reporting quality and   information risk; prior   research suggests that financial reporting quality affects information risk, and in tum, affects firm's  cost of capital. We find that firms with poor accruals quality have higher cost of capital relative to firms with high accruals quality. We also find that the effect of discretionary accruals quality on cost of capital (cost of debt and cost of equity) is greater than for non-discretionary accruals (innate accruals) quality.

Abstract In this research study, we have used the Transparency and Disclosure scores set by Standard & Poors for evaluation and trend analysis of transparency of the companies listed in Tehran Stock Exchange. We have also examined the correlation of transparency scores with some factors such as: size of the companies, leverage ratios, profitability, ownership structure, and number of independent board members. This research study indicates that the Corporate Transparency score was 28 percent in the year 2001 and increased to 32 percent in 2007. Comparison of this result with the studies performed abroad by Standard & Poors reveals the weak position of Iran in Corporate Transparency among other Asian countries, Europeans and also Latin Americans. In addition, we found a positive correlation between the Corporate Transparency and size of the companies but there was no correlation with the other factors mentioned above. Based on the results of this study, we are of the opinion that at present, the companies have no motivation for increasing the Corporate Transparency.

Abstract Resources allocation is considered to be one of the main activities for banks.  The most important risk that threatens this activity is commitments refusal on the part of facilities receiver. One of the ways that can be used to benefit properly from investment opportunities and help to stop wasting resources is bankruptcy prediction and default probability. In this research, we have established Multiple Discriminant Analysis (MDA) model to predict the default of the companies which receive facilities and credit. The result of this research, which are based  on  the  information  provided  by  the  companies  receiving facilities  and credit from  Industry and Mine  Bank, have  indicated that, five ratios of the seventeen selected ratios  have the most power in distinguishing the group of companies with default and without default. Another result is that there is a trade-off between ROA and default probability and the last conclusion is that the companies with a higher net profit are more successful in repaying their credits and facilities.

Abstract This study compares returns from using two different strategies­ technical analysis and Buy-Hold strategy- of investment in Iranian capital market. For this purpose, we calculate the returns from active strategy arising from Bollinger Bands and Relative Strength Index (RSI) model and compare with the return from using the Buy-Hold as a passive strategy, for the period of 1376-1386. Our results show that during of our study period, the returns from active strategy by using Bollinger Bands and Relative Strength Index (RSI) model do not exceed the return from   using the Buy-Hold as a passive strategy in the TSE. However, Bollinger Bands and Relative Strength Index (RSI) model has a lower return variance relative to Buy-Hold strategy. Therefore, in point of view of risk, the active strategy is more advantageous than the passive strategy.

Abstract Investigating firms’ performance is a special interest for investors, creditors and other stockholders, and the results of these studies are used for decision making. In order to evaluating firm’s performance, different measures have been introduced   and been used. However, none of these measures are perfect and been criticized, and efforts have been placed to introduce new measures. Given to the existing limitations in the accounting, economic, and market information to evaluate firm's performance, researchers have tried to use Tobin's Q, as an integrative (synthetic) data, for firm's performance evaluations. This paper studies the usefulness of replacing EPS with Tobin’s Q by evaluating the correlation between these two. Our findings show that a positive correlation between EPS and Tobin's Q. However, this correlation is not (rp = 0.484). Our results do not suggest using only Tobin's Q in evaluating firm's performance.