The interactive effect of the auditor's size on the relationship between political connections, financial helplessness and agency costs in the Companies admitted to the Tehran Stock Exchange.
Seyed Kazem
Ebrahimi
Director of Accounting Department of Semnan University of Science and Economics, Iran
author
Ali
Bahraminasab
Faculty Member of Faculty of Economics and Management, Semnan University, Iran
author
Eshagh
Karimi
Graduate Student, Faculty of Management Economics, Faculty of Semnan, Iran
author
text
article
2019
per
The aim of this research is to determine interactive effect of the auditor's size on the relationship between political connections, financial crisis and agency costs. Auditors can affect the selection of accounting methods by management and undesirable effects of ownership separation of and management can be diluted by reducing information asymmetry between consumers and suppliers. Top executives and administrators are often considered powerful because they can benefit from a set of benefits. A strong increase in financial confidence can lead to the bankruptcy of a large financial or non - financial institution. It is directly related to mistrust of the government's future policies. The statistical sample of this research consists of 90 companies in the time period of 1388 to 1396. The inferential statistic is based on logit regression, in which the combined data analysis and integration is used. The results of the first hypothesis showed that audit quality has a significant negative effect on the financial crisis of companies. The results of the second hypothesis showed that the effect of mediating the audit quality on the relationship between political connections and agency costs has a significant negative effect. The results of the third hypothesis showed that the effect of the mediating effect of audit quality on the relationship between political connections and financial crisis has no significant effect. 1- Introduction The aim this research is to determine the relationship between political connections, financial crisis and agency costs. Auditors can affect the selection of accounting methods by management and undesirable effects of ownership of ownership and management can be diluted by reducing information asymmetry between consumers and suppliers. Top executives and administrators are often considered powerful because they can benefit from a set of benefits. A strong increase in financial confidence can lead to the bankruptcy of a large financial or non - financial institution. It is directly related to mistrust of the government's future policies. 2- Hypothesis The aim this research is to determine interactive effect of the auditor's size on the relationship between political connections, financial crisis and agency costs of the companies listed in Tehran Stock Exchange. Consequently, the following hypotheses are provided: H1: Audit quality has a significant effect on the financial crisis. H2: Audit quality has a significant effect on the relationship between political connections and agency costs. H3: Audit quality has a significant effect on the relationship between political connections and financial crisis. 3- Methods This is an applied research in terms of purpose and in terms of method, it is descriptive research which is based on log it regression analysis. For data analysis and hypothesis testing, the information required through the audited financial statements has been collected for 90 companies for a period of 9 years (2009 to 2017). For to the final analysis, Eviews software is used. 4- Results The results of the first hypothesis showed that audit quality has a significant negative effect on the financial crisis of companies. The results of the second hypothesis showed that the effect of mediating the audit quality on the relationship between political connections and agency costs has a significant negative effect. The results of the third hypothesis showed that the effect of the mediating effect of audit quality on the relationship between political connections and financial crisis has no significant effect. 5- Conclusion The results showed that, the first hypothesis showed that audit quality has a significant negative effect on the financial crisis of companies. Hence, auditors' role in helping investors in conscious decision making and enhancing the cohesion of financial markets is important. Lawmakers around the world have always been trying to improve the audit quality carried out by the auditors. The confidence of investors and creditors depends on the audit quality. As a result, the higher the audit quality, the more investors and creditors are willing to invest more and give more credit and take the company away from the financial crisis. The results of the second hypothesis showed that the effect of mediating the audit quality on the relationship between political connections and agency costs has a significant negative effect. By increasing the audit quality, conflicts arising from the separation of ownership and management are reduced. As a result, the agency costs are reduced. The results of the third hypothesis of research at 95 % confidence level showed that there is no significant relationship between the mediating quality of auditing on the relationship between political relations and financial crisis. Considering this assumption means that the audit organization has the highest quality. The quality of the audit organization may be less than some other institutions. It is also assumed that other auditing institutions may have higher quality. For this reason, there is no significant relationship between the mediating quality of auditing on the relationship between political connections and financial crisis.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
1
34
https://jaa.shirazu.ac.ir/article_5500_37ef8c9607d5c170e7f0313a243022d6.pdf
dx.doi.org/10.22099/jaa.2019.29554.1713
The Role of Stock Price Synchronicity on Portfolio Optimization
meysam
amiri
Assistant Professor - School of Management and Accounting
- Allameh Tabatabaei University
author
Seyed Mojtaba
Hoseini
Payame noor university
author
Jafar
Babajani
استاد گروه حسابداری دانشگاه علامه طباطبایی
author
Mohammad javad
salimi
استادیار گروه حسابداری دانشگاه علامه طباطبایی
author
text
article
2019
per
In this paper, we investigate the effects of financial statement comparability on the corporate cash holdings of Tehran Stock Exchange firms. Required data for the study were collected from the financial statements of 110 firms in the 1390-1395 years. To examine the hypotheses, we used multivariate regression with panel data. For calculation of comparability of the model variable, we referred to Di Franco et al. (2011). The results revealed that there is negative and significant relationship between financial statement comparability and corporate cash holding. In addition, among the moderating variables in this research, financial reporting quality has a moderating role in influencing the Financial statement comparability with cash holdings.The negative relationship between the ability to compare financial statements and remuneration through the theory of representation is justifiable. Representative theory states that opportunistic managers spend on investing in projects with a net negative net worth 1- Introduction In this paper, we investigate the effects of financial statement comparability on the corporate cash holdings of Tehran Stock Exchange firms. We further examine whether financing constraints, financial reporting quality, and firm-level corporate governance mediate this association. Financial statement comparability describes the degree of similarity in accounting choices among two or more firms and reflects “the relationship between two or more pieces of information” (Financial Accounting Standards Board (FASB) [1980]). It also reflects the quality of the information that enables users to identify similarities and differences in the financial performance of two firms (Francis et al., 2014). 2- Research Hypotheses In order to achieve the objectives of this research, the following hypotheses are developed: H1: Financial statement comparability has an effect on corporate cash holdings. H2: Financing constraints mediate the effect of financial statement comparability on corporate cash holdings. H3: Financial reporting quality mediates the effect of financial statement comparability on corporate cash holdings. H4: Corporate governance, as proxies by institutional ownership, mediates the effect of financial statement comparability on corporate cash holdings. 3- Methods Required data for the study were collected from the financial statements of 110 firms in the 1390-1395 years. To examine the hypotheses, we used multivariate regression with panel data. For calculation of comparability of the model variable we referred to Di Franco et al. (2011). For assessment of the cash holdings, we used the model by Ozkan and Ozkan (2002). 4- Results The results revealed that there is a negative and significant relationship between financial statement comparability and corporate cash holding. In addition, among the moderating variables in this research, financial reporting quality has a moderating role in influencing the Financial statement comparability with cash holdings. 5- Discussion The negative relationship between the ability to compare financial statements and remuneration through the theory of representation is justifiable. Representative theory states that opportunistic managers spend on investing in projects with a net negative net worth.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
35
82
https://jaa.shirazu.ac.ir/article_5600_5681a2b57b608d207d98c7e56ab2b745.pdf
dx.doi.org/10.22099/jaa.2019.32208.1817
Financial statement comparability and corporate cash holdings
Zohreh
Hajiha
دانشیار گروه آموزشی حسابداری تهران شرق
author
Hassan
Chenari
South Tehran Branch, Islamic Azad University
author
text
article
2019
per
In this paper, we investigate the effects of financial statement comparability on the corporate cash holdings of Tehran Stock Exchange firms. Required data for the study were collected from the financial statements of 110 firms in the 1390-1395 years. To examine the hypothesis, we used multivariate regression with panel data. For calculation of comparability of the model variable, we referred to Di Franco et al. (2011). The results revealed that there is negative and significant relationship between financial statement comparability and corporate cash holding. In addition, among the moderating variables in this research, financial reporting quality has a moderating role in influencing the Financial statement comparability with cash holdings. The negative relationship between the ability to compare financial statements and remuneration through the theory of representation is justifiable. Representative theory states that opportunistic managers spend on investing in projects with a net negative net worth 1- Introduction In this paper, we investigate the effects of financial statement comparability on the corporate cash holdings of Tehran Stock Exchange firms. We further examine whether financing constraints, financial reporting quality, and firm-level corporate governance mediate this association. Financial statement comparability describes the degree of similarity in accounting choices among two or more firms and reflects “the relationship between two or more pieces of information” (Financial Accounting Standards Board (FASB) [1980]). It also reflects the quality of the information that enables users to identify similarities and differences in the financial performance of two firms (Francis et al., 2014). 2- Hypothesis In order to achieve the objectives of this research, the following hypothesis are developed: H1: Financial statement comparability has an effect on corporate cash holdings. H2: Financing constraints mediate the effect of financial statement comparability on corporate cash holdings. H3: Financial reporting quality mediates the effect of financial statement comparability on corporate cash holdings. H4: Corporate governance, as proxies by institutional ownership, mediates the effect of financial statement comparability on corporate cash holdings. 3- Methods Required data for the study were collected from the financial statements of 110 firms in the 1390-1395 years. To examine the hypothesis, we used multivariate regression with panel data. For calculation of comparability of the model variable we referred to Di Franco et al. (2011). For assessment of the cash holdings, we used the model by Ozkan and Ozkan (2002). 4- Results The results revealed that there is a negative and significant relationship between financial statement comparability and corporate cash holding. In addition, among the moderating variables in this research, financial reporting quality has a moderating role in influencing the Financial statement comparability with cash holdings. 5- Discussion and Conclusion The negative relationship between the ability to compare financial statements and remuneration through the theory of representation is justifiable. Representative theory states that opportunistic managers spend on investing in projects with a net negative net worth.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
83
116
https://jaa.shirazu.ac.ir/article_5676_f3c51eaa3b04906ae0bbb2a5d47c5b1c.pdf
dx.doi.org/10.22099/jaa.2019.30217.1730
A Review of Factors Affecting on Managers Budgetary Bias
milad
Darvishi
MSC.of Management Accounting,Ferdowsi university Of Mashhad,Mashhad<Iran<darvishi.milad@um.ac.ir
author
Mohammad javad
Saei
department of accounting, faculty of Economics &amp; Administrative Sciences, ferdowsi university of mashhad, mashhad, iran
author
Behzad
Kkardan
department of accounting, Faculty of Economics &amp; Administrative Sciences, ferdowsi university of mashhad, mashhad, iran
author
text
article
2019
per
Subsequent to the failure of companies such as Global Crossings, the importance of ethical behavior has again resurfaced in the business community and society in general. Since the budgetary bias is known as an unethical problem and the result of managers' undesirable behaviors to achieving specific goals, the purpose of this research is to increase the insight in the field of budgetary bias in organizations. This research consists of a theoretical elaboration of a coherent framework for describing the managers' budgetary bias and investigating the impact of various factors on it. Therefore, an empirical test was done to investigate the effect of four factors, including personal goals, organizational factors, organizational power, and situational influences on budgetary bias, through the data of 101 companies listed in the Tehran Stock Exchange during the years 2012 to 2016. The results showed that organizational factors and situational influences have the most significant role in motivating managers to create budgetary bias. 1- Introduction Subsequent to the failure of companies such as Global Crossings, the importance of ethical behavior has again resurfaced in the business community and society in general. Since the budgetary bias is known as an unethical problem, the purpose of this research is to increase the insight in the field of budgetary bias in organizations. 2- Hypothesis Research hypothesis is developed as follows: H1. Job security has a significant effect on budgetary bias. H2. Compensation has a significant effect on budgetary bias. H3. Authority has a significant effect on budgetary bias. H4. The influence of the CEO has a significant effect on budgetary bias. H5. The influence of the chairman of the board has a significant effect on budgetary bias. H6. Profitability has a significant effect on budgetary bias. H7. Uncertainty has a significant effect on budgetary bias. 3- Methods To test the hypothesis, we use one of managers' budgetary reports, namely earning per share (EPS), and a sample of 101 companies from the accepted ones in the Tehran Securities Exchange during the years 1391 to 1395. 4- Results The results showed that among various factors, the organizational factors and situational influences have the most effect on budgetary bias. 5- Discussion and Conclusion The purpose of this research was to investigate the impact of various factors on budgetary bias. Results recommend that users of company budget reports should consider the organizational power of managers and uncertainty in validating the reports of managers.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
117
150
https://jaa.shirazu.ac.ir/article_5480_bf50b5da87c7fe73e39294ee629cff57.pdf
dx.doi.org/10.22099/jaa.2019.31736.1795
Control Mechanisms, CEO Power and Firm Value
Alireza
Rahimi
Shahid Bahonar University of Kerman
author
Aref
Forughi
Shahid Bahonar University of Kerman
author
text
article
2019
per
This study investigates the effect that control mechanisms could have on CEO power and firm value relationship. CEO power is measured using three criteria, namely CEO tenure, CEO duality and board independence. Control mechanics are both internal and external. To proxy for internal and external controls, corporate governance and market competition are used, respectively. The sample consists of 122 firms listed in Tehran Stock Exchange from 2014 to 2018. Findings indicate that market competition and corporate governance have a positive effect on CEO power and firm value relationship. 1- Introduction This study investigates the effect of control mechanisms on CEO power and firm value relationship. CEO power is measured using CEO tenure and duality and board independence. Control mechanisms are both internal and external, represented by corporate governance and product market competition respectively. Tobin's Q is used to proxy for firm value. 2- Hypothesis We are supposed to examine the effect of control mechanisms on CEO power and firm value relationship. Two hypotheses are developed as follow: H1: Corporate governance improves CEO power and firm value relationship. H2: Product market competition improves CEO power and firm value relationship. 3- Methods By purpose, this is an applied research and empirical in terms of methodology. We use multivariate regression to test the hypothesis. Data is gathered from CODAL database. Our sample is 122 firms listed with Tehran Stock Exchange from 2014 to 2018. 4- Results Findings are indicative of positive effect of product market competition and corporate governance on CEO power and firm value relationship. The findings are further elaborated by referring to firm structure as opposed to firm management. 5- Discussion and Conclusion Assuming that each firm needs two components of good structure and good management to benefit well from its potentials, one would conclude that in case of weak structure the contribution of management in overall success of a company would increase. Moreover, where there is a good structure set in place or in a well-structured company, management is not expected to be granted much authority to be able to either improve significantly or impair the structure. We found product market competition to be positively associated with CEO power and firm value relationship. Management power is a value creating mechanism in competitive situations. As for the second hypothesis, we found internal control mechanism, which is corporate governance, to be positively influencing CEO power and firm value relationship. Referring to firm structure as an important component in overall firm success, corporate governance empowers firm structure. Findings of the second hypothesis corroborate the explanation provided earlier. That is, for a firm to be successful, structure matters. That said, we conclude that CEO power contributes to firm value in cases where there is a good structure in place. Overall, to best benefit from CEO power, that is to either mitigate opportunistic behavior or enhance efficiency, we need a control environment to guide the higher authority to value creating activities.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
151
182
https://jaa.shirazu.ac.ir/article_5497_7d4fefc3e61b89d94ac5b0ba38fe5ad3.pdf
dx.doi.org/10.22099/jaa.2019.32078.1810
The role of financing constraints and environmental uncertainty in limiting the link between operational diversification and the weakness of internal controls
mohsen
rashidi baqhi
Assistant Prof. in accounting, Faculty of Economics and Administrative Sciences, Lorestan University , Iran
author
text
article
2019
per
The purpose of this paper is to examine the role of financing constraints and environmental uncertainty in limiting the relationship between operational diversification and weak internal controls. For this purpose, data on 120 stock companies for the period 2007-2017 were extracted and logistic regression was used to test the hypothesis. According to the first hypothesis, product diversification has a significant relationship with weak internal controls. In addition, environmental uncertainty has a significant impact on the relationship between diversification and weak internal controls. Finally, financing constraints do not have a significant effect on the relationship between diversification and weak internal controls. 1-Introduction Given the organizational complexity of the companies, the agency conflict hypothesis states that, during diversification, managers have the opportunity to engage in nonoperational activities to gain personal interests through decision-making and control. Companies with higher diversification may tend to have ineffective internal controls because strong internal controls emphasize the prevention and discovery of opportunistic activities. Managers have the ability to transfer interests from shareholders to their own through ineffective controls. On the other hand, some managers, with the establishment of internal controls, tend to conceal their opportunism. In this situation, internal controls do not have high quality and effectiveness. The opportunistic approach of managers leads to postponing bad news due to weaknesses in performance and the quality of internal controls can be a factor in modifying it. The purpose of this paper is to examine the role of financing constraints and environmental uncertainty in limiting the relationship between operational diversification and the weakness of internal controls. 2- Hypothesis The purpose of this paper is to examine the role of financing constraints and environmental uncertainty in limiting the relationship between operational diversification and the weakness of internal controls. The primary goal of the research is to examine the effectiveness of diversification on internal controls; then the research progresses to study the direction and quality of the financing constraints and environmental uncertainty effect. Thus, research hypothesis is developed as follows: H1: Diversification leads to change in the quality of internal controls. H2: Environmental uncertainty has a significant effect on the joint interaction of operational diversification and the weakness of internal controls. H3: Financing constraints have a significant effect on the joint interaction of operational diversification and the weakness of internal controls. 3- Methods The purpose of this study is descriptive and based on the nature and method of correlation. Considering that this research can be used in the decision making process of investors, the type of applied research is considered. In this research, library method has been used to collect data and information. Then, for collecting the research data, compact discs, visual and statistical archives of the Tehran Stock Exchange, the official website of Tehran Stock Exchange and other related online databases have been used. For this purpose, data on 120 companies listed in Tehran Stock Exchange for the period of 1386 to 1396 were extracted and a logistic regression model was used to test the research hypothesis. 4- Results The results of the research indicate that the business units with diversification have weaker internal control quality. In addition, the second hypothesis of the research indicates that environmental uncertainty has a significant effect on the common interaction of diversification and the weakness of internal controls. Finally, the results indicate that financing constraints have a significant effect on the joint engagement of diversification and the weakness of internal controls. 5- Discussion and Conclusion In this research, the role of financing limitation and environmental uncertainty in limiting the internal control implications of diversification has been studied. The first hypothesis of the study that diversification has led to a change in the quality of internal controls has been confirmed. The results of this hypothesis are similar to those of Chen and keung (2018). It is believed that diversification can lead to inefficient investment. This problem arises from directors' use of resources and excessive investment in projects with negative current value because of personal gain (Jensen, 1986). They concluded that managers in order to develop opportunistic behaviors in companies, increase the diversity of products reducing the quality of internal controls to conceal the transmission of negative information. The second hypothesis of the research has confirmed; environmental uncertainty has a significant effect on the common interaction of diversification and the weakness of internal controls. The results show that environmental uncertainty leads to negative changes in performance so that in uncertainty situation, the diversification has no ability to moderate internal controls as a result of management behavior. The results of this hypothesis are consistent with the research by Armstrong et al (2011). The flow of information in the market environment affects the behavior of market actors. Environmental changes create the conditions that people in the market have a different contribution to this information flow. What is more important is the existence of an information environment that reduces ambiguity and uncertainty and thus increases the ability of investor prediction and analysis. The third hypothesis of the research is that the financing limit has a significant effect on the joint interaction of diversification and the weakness of internal controls. While agency problems are usually due to excessive investment by managers with respect to personal interests, diversification leads to a change in liquidity situation in companies with liquidity constraints. In this context, the financing limitation simply leads to lower investment (Petty, 2003), the theory of modern investment suggests that companies are willing to invest in fixed return projects and, in the case of financing constraints, the managers’ opportunity to weaken internal controls will be limited.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
183
206
https://jaa.shirazu.ac.ir/article_5453_b1688948242104cab8db04f5f1db8b5e.pdf
dx.doi.org/10.22099/jaa.2019.31942.1801
Assessing the Financial Stability Indicators of Commercial Banks from the Experts point of View
Seyed Ahmad
Seyedi
Ph.D Student Of Accounting ,Shahrood Branch, Islamic Azad University, Shahrood, Iran.
author
Mohammadreza
Abdoli
Associate Professor Department Of Accounting ,Shahrood Branch, Islamic Azad University, Shahrood, Iran.
author
Mahdi
Jabbari noghabi
Assistant Professor,Department of Statistics,Ferdowsi University of Mashhad,Mashhad-Iran.
author
text
article
2019
per
In examining the financial health of banks, selecting and defining indicators is one of the key steps. The purpose of this research is to create indicators for measuring the financial health of Iranian commercial banks in terms of banking and academic experts. To this end, 1000 questionnaires were collected during the year 2018 from the banking experts of all commercial banks of the country that have two concurrent conditions: a) having a bachelor's degree in accounting, banking, economics and management; b) Having a senior management experience of over 5 years in the bank, as well as academic experts. Of these, 715 items were collected at a return rate of 5.71%, of which 507questionnaires were available. The research method is descriptive-correlational. For data analysis and testing of hypothesis, R software and confirmatory factor analysis were used. The findings showed that from the perspective of banking and academic experts, capital adequacy, asset quality, profitability, liquidity, management quality, market risk sensitivity, Islamic banking, corporate governance, and facilities with technical and economic backing have effect on financial health Banks, and from which, liquidity index, market risk sensitivity and management quality have the most impact. 1-Introduction One of the most critical sections of each economy is banking industry Undoubtedly. Financial soundness in banking system is important to establish stability in economics and monetary mechanism, and keep investors interests and trustfulness to the banking industry. Therefore, there is a need to monitor the banks by regulators such as central bank. So, it is important to make an index to evaluate the banking soundness. The aim of this study is to make some indexes to measure the business banks soundness based on the banking and academic experts’ viewpoints. 2- Hypothesis The research hypothesis is designed and developed as follows: H1: From the perspective of banking experts, capital adequacy index is effective in measuring financial soundness. H2: From the perspective of banking experts, the asset quality index is effective in assessing financial soundness. H3: From the perspective of banking experts, the indicator of profitability is effective in measuring financial soundness. H4: From the viewpoint of banking experts, the liquidity index is effective in assessing financial soundness. H5: From the viewpoint of banking experts, the quality management index is effective in assessing financial soundness. H6: From the perspective of banking experts, the index of market risk sensitivity is effective in measuring financial soundness. H7: From the viewpoint of banking experts, the Islamic banking index is effective in measuring financial soundness. H8: From the perspective of banking experts, the corporate governance index is effective in measuring financial soundness. H9: From the viewpoint of banking experts, the indicator of the amount of facilities with technical and economic backing is effective in measuring financial soundness. H10: From the viewpoint of banking experts, the index of banking business is effective in measuring financial soundness. H11: From the viewpoint of banking experts, other factors are effective in measuring financial soundness. 3- Methods The research method is descriptive-survey type and aim to present an applied research. A questionnaire including 105 questions is designed based on the literature and interview with banking experts. This is a five-scale questionnaire. The statistical population includes senior, middle and operational managers of banks that have two characteristics: a) they should have an academic degree in accounting, banking, economics or management, and b) they should have at least 5 years of experience. The sample size of the statistical community that has been obtained using R software is at least 490. According to the sample size, 1000 questionnaires were sent. A total of 715 questionnaires were collected by senior, middle and operational managers of banks, of which 507 questionnaires were acceptable and used. 4- Results The results show that all of indicators have significant effects on banking soundness except banking business and other miscellaneous aspects. On the other hand, the results suggest that nine factors including capital adequacy index, asset quality, profitability, liquidity, management quality, market risk sensitivity, Islamic banking, corporate governance, the amount of facilities with technical and economic backing are effective in building banking financial soundness. 5- Conclusion and Discussion: The present study suggests that Islamic banking indicators, corporate governance mechanisms and the amount of facilities with technical and economic backing have to add to soundness indexes in banking industry. The difference in sounds structure of Islamic banks conventional banks is emphasized in this study.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
207
251
https://jaa.shirazu.ac.ir/article_5425_a1f984f28c28ba5c20127bc212b41bdb.pdf
dx.doi.org/10.22099/jaa.2019.33200.1858
The Effect of Managers Discretion in Fair Value Measurement on Investment Selling Decisions
Mohammad
Alimoradi
Department of Accounting, Shahrekord Branch,
Islamic Azad University, Shahrekord, Iran.
author
Saeid
Aliahmadi
Department of Accounting, Isfahan (Khorasgan) Branch,
Islamic Azad University, Isfahan, Iran
author
Daruosh
Foroghi
Department of Accounting, University of Isfahan,
Isfahan, Iran
author
text
article
2019
per
Fair value accounting for valuation of assets and liabilities has given managers the discretion.The purpose of this study is to investigate the effect of manager’s discretion allowed in fair value measurement on investment selling decisions. In order to test the research hypotheses, a questionnaire based on the scenario was used. This questionnaire is based on Green et al. (2015). The statistical population consists of all active financial analysts in investment companies and stock exchange brokers and the statistical sample of the study was determined using the sample size tables of Cohen et al. (2000) of 268 people. Multivariate analysis of variance (MANOVA) and univariate analysis of variance (ANOVA) were used to analyze the data and test hypotheses. The results of this study showed that conservatism and its interaction with the fair value volatility have a significant effect on the investment selling decisions based on fair value, but the fair value volatility has no significant effect on these decisions. Overall, the results of the research showed that the directors' discretions in fair value accounting affects investment selling decisions. 1- Introduction Accounting academics and practitioners have been debating the reliability and relevance of fair value accounting. According to Financial Accounting Standards, fair value accounting, often referred to as mark-to-market occurs when a firm revalues assets and liabilities based on an exit price. Advocates contend that fair value provides valuable and timely information to financial statement users by increasing transparency that aid in assessing firm value. In contrast, opponents argue that fair value is transitory because once the asset or liability is traded, the related accounting entries are reversed (Green, 2015). Thus, fair value may provide misleading and unreliable information. In particular, Level 3 fair value assets have no observable inputs and are valued by managers’ assumptions, thus the fair value is subjective (Zyla, 2013). Level 3 fair values are unique in that subjective assumptions that are necessary to arrive at the fair value are based on unobservable inputs. According to the IASB codification glossary, unobservable inputs are defined as “market data that are not available and that are developed using the best information available about the assumptions that market participants would use 2 when pricing the asset or liability”. Depending on the valuation method selected, discretion can include the expected life of the asset or liability, the cash discount rate, and risk return rates (Zyla, 2013). This discretion can affect financial statements. Prior reserch has established that factors such as earnings management (Dechow and Shakespear, 2009, Dechow et al, 2010), optimism (Kedia and Philippon, 2009), national culture (Ball et al., 2000), fear of litigation (Lobo and Zhou, 2006), and auditor compliance (Milbradt 2012) influence the recognized fair value. However, limited research has examined how managerial behavioral effects prior to recognizing fair value (Chen et al., 2013, Green, 2015). Motivated reasoning theory contends that individuals will perceive information in a manner that will benefit their desired outcome (Kunda 1990). Thus, managers are likely to view a fair value that results in gains as a valid representation of the true underlying value. Because of the resulting unrealized gains, managers will be motivated to base Level 3 fair value selling decisions at the fair valuation amount (Green, 2015). When examining manager’s likelihood to sell a Level 3 fair value asset or liability, prospect theory (Kahneman and Tversky, 1979) suggests that only unrealized gain from the increase of the recognized fair value will motivate managers to be risk averse. In order to preserve the unrealized gain, managers will not sell the asset or liability if the market offers a price less than the most recent recognized fair value (Green, 2015). 2- Research hypotheses Based on theoretical foundations and research background, the research hypotheses can be expressed as follows: H1: The conservative level used in the assessment of fair value affects the decision to sell investment at the 3 level of fair value. H2: The level of historical volatility of fair value affects the decision to sell investment at the 3 level of fair value. H3: The interaction of the level of conservatism and the level of historical volatility of fair value, affects the decisio to sell investment at the 3 level of fair value. 3- Methods This research in terms of purpose is a fundamental research, in terms of method is quasi-empirical and in the point of data collection is survey. In this research, to test the research hypotheses, a questionnaire based on the scenario was used. This questionnaire is based on Green (2015). The statistical population consists of all active financial analysts in investment companies and stock exchange brokers and the statistical sample of the study was determined using the sample size tables of Cohen et al. (2000) of 268 people. Multivariate analysis of variance (MANOVA) and univariate analysis of variance (ANOVA) were used to analyze the data and test hypotheses. 4- Results The results of this study showed that conservatism and its interaction with the fair value volatility have a significant effect on the investment selling decisions based on fair value. However, the fair value volatility has no significant effect on these decisions. The other results showed that financial analysts' demographic characteristics do not have a significant effect on investment decision-making. Overall, the results of the research showed that the directors' discretions in fair value accounting affects investment selling decisions. 5- Discussion and conclusion Findings of the research indicate that with the increase in the level of conservatism used in the assessment of fair value, managers' willingness to sell investments increases. This result is consistent with the motivated reasoning and the prospect theory. The results of this study are consistent with the results of Green (2015). In addition, the results of the research showed that the historical volatility of fair value does not affect the decision of investment sales. This result is not consistent with agency theory and prospect theory, but is consistent with the results of Green (2015). The sensitivity analysis of this result suggests that, the increase in the fair value volatility, the asking sales price and the probability of sales below the current fair value has not increased and did not reduce the lowest acceptable price. Keywords: Manager Discretion, Conservatism, Fair Value Volatility, Investment Selling Decisions.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
253
284
https://jaa.shirazu.ac.ir/article_5422_df79a6f70e4320fac544afd29c42bb19.pdf
dx.doi.org/10.22099/jaa.2019.32550.1831
Selection of optimal stock portfolios using accounting information, value-based information and balanced scorecard information. - Study: Companies listed in Tehran
Hasan
Fattahi nafchi
phd accounting student
author
Mehdi
Arabsalehi
دانشیار گروه حسابداری دانشگاه اصفهان
author
Majid
Esmaelian
دانشیار گروه مدیریت دانشگاه اصفهان
author
text
article
2019
per
The purpose of the present study is to develop a comprehensive optimal portfolio model using accounting information analysis, value-based information and balanced scorecard information. The statistical population of the research is the companies listed in Tehran Stock Exchange during the period 2007-2017. In order to achieve the objectives of the research, the formulation of dimensionality reduction, data envelopment analysis methods, backing vector machines, and clustering algorithms were used. The above model was implemented in four steps and in each step besides risk and return component, accounting criteria, value based criteria and financial criteria and then non-financial balanced scorecard were used as input step by step portfolio model. The findings of the research indicate that the criteria used in the research for optimizing the portfolio of stocks have informational content and the addition of each set of criteria leads to an increase in the efficiency of the portfolio. This information content of the balanced scorecard is even more impressive. Overall, the simultaneous application of hybrid optimization methods and comprehensive benchmarks extracted from financial reports resulted in a more optimized portfolio and higher risk-taking and Markovitz literature returns. * Corresponding author: Mehdi Arab Salehi Associate Professor of Accounting, Esfahan University, Iran. 1- Introduction One of the main goals of accounting is providing information for use in investment decisions. The discovery of the value of information provided by accounting systems is one of the major axes of empirical studies in the field of financial and accounting knowledge. Given the constraints on investment resources, if investors invest all their resources in a particular asset, they will increase the risk of losing their resources, which is not, in their view, desirable. Therefore, the main problem for investors is the determination of a set of securities that leads to maximization of wealth. This also leads to the selection of the optimal stock portfolio from a set of stock portfolios in order to maximize the benefits to shareholders. The effective components of choosing the optimal stock portfolio are two main factors: the criteria used in stock portfolios and the approach of choosing stock portfolios. In this research, we focus on choosing the optimal portfolio based on a comprehensive model including accounting information, value-based information and balanced scorecard information and a dimensionality reduction approach. 2- Research Question Is it possible to use a comprehensive set of analysis of accounting information, value-based information and a balanced scorecard information, and using the Dimension Reduction Approach to create an optimal stock portfolio model, so that this model would increase shareholders' returns? 3- Methods The research methodology is a quantitative research that uses the scientific method and empirical evidence, and based research designs is done. The empirical data was collected from a panel consisting of 103 Iranian companies listed in TSE, over the seven-year period of 2007 to 2017. The criteria used in this study are accounting information, value-based information and balanced scorecard information. In order to achieve the research goals and to create optimal stock portfolios, we used Data Envelopment Analysis, Support Vector Machine and Anomaly Clustering algorithms. The above method was implemented in four stages. At each stage, in addition to the risk and return components, we used accounting information, value-based information and balanced scorecard information as a step-by-step portfolio input. 4- Results The findings of the research indicate that the criteria used in the research to provide the stock portfolio are informative and adding each category of criteria will lead to an increase in the utility of the stock portfolio. In addition, this in formativeness has increased significantly with the balanced scorecard. Generally, the simultaneous use of hybrid optimization techniques and comprehensive criteria derived from the financial stock portfolios were more optimal and more favorable than the risk and efficiency of the Markovitz literature.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
285
320
https://jaa.shirazu.ac.ir/article_5466_acef2377614e58af23f035ff967e99b8.pdf
dx.doi.org/10.22099/jaa.2019.34053.1886
Study the mediating role of internal control weaknesses on the relationship between indicators of companies’ income information content and audit quality
Rasoul
Keshtkar
Phd.in Accounting,Department of Accounting,Isfahan(khorasgan)Branch,Islamic Azad University ,Isfahan.Iran.
author
shokrollah
khajavi
استاد حسابداری دانشگاه شیراز
author
Mohsen
Dastgie
khorasgan
author
text
article
2019
per
Reaching to the income information content is depend on the accuracy of each chain in the financial reporting chain including the requirement for doing independent audit, the determination and application of audit quality indicators, control, disclosure and presentation of strategies for remedies and reduction of internal control weaknesses. In this regard, the present research attempts to study the mediating role of internal control weaknesses on the relationship between indicators of companies’ income information content and audit quality. For this, the quality of information content of income and its criteria regarded as dependent variable, audit quality and its criteria regarded as independent variables and weaknesses of internal control and its criteria act as mediating variable. Research method is descriptive correlational. Research sample is includes 122 companies listed in Tehran Stock Exchange from 1386 to 1395. Research results showed that internal control weakness for financial reporting can play mediating role in the relation between audit quality and information content of income. However, internal control weakness for operation and rules do not such a role. These findings can improve the information content of companies’ income thorough the audit quality. 1- Introduction This research focuses on the companies’ income information content, which has triggered a vivid discussion on the topic since Beaver’s (1968) seminal paper on market reaction to earnings announcements. Prior research on investor reactions to earnings announcements has shown that the institutional setting significantly influences the information content of these announcements (e.g. DeFond, Hung, & Trezevant, 2007). However, this literature does not consider the role of firm-specific governance mechanisms and the role they play in enhancing the companies’ income information content. We posit that audit quality has a significant influence on the companies’ income information content and that this relationship varies across institutional settings. On the other hand, high-profile accounting scandals at Enron, WorldCom and other major corporations in the early 2000s prompted the public to question the reliability of firms' financial reporting. Accounting theory suggests that the reliability of financial reporting is a function of the effectiveness of firms' internal control (Donaldson, 2005). However, the evidence in studies of Zhang, Zhou and Zhou (2007), Chen, Gul, Truong and Veeraraghavan (2012), Ravenstein, Georgakopoulos, Kalantonis and Kaldis (2013), and Chen, Gul and Truong (2016) suggests that audit quality has a beneficial role in reducing the weakness of internal controls. Therefore, weaknesses of firms' internal control are a mediating variable (Baron and Kenny, 1968; Namazi and Namazi, 2017). In general, reaching to the information content of companies’ income is dependent on the accuracy of each link in the financial reporting chain including the requirement for doing independent audit, the determination and application of audit quality indicators, control, disclosure and presentation of strategies for remedies and reduction of internal control weaknesses. For this, the present research attempts to study the mediating role of internal control weaknesses on the relationship between indicators of companies’ income information content and audit quality. 2- Hypothesis Based on the theoretical literature and the conducted studies, research hypothesis was developed as follows: H1: audit quality affects companies’ income information content through the mediation of internal control weaknesses related to financial reporting. H2: audit quality affects companies’ income information content through the mediation of internal control weaknesses related to operations, laws and regulations. In general, based on the number of criteria for each of the independent variables (four criteria) and dependent (four criteria), each of the main hypothesis will have 16 subset hypothesis. 3- Methods The research methodology is a quantitative research that adopts the scientific method and empirical evidence, based on hypothesis and ex-post research designs. This type of research is utilized when criteria data quantitative are used. In this research, data of 122 companies are analyzed for the period of 2008-2017. The related data was collected through observation of Iranian database of the Tehran Stock Exchange (TSE) named Tadbir Pardaz, annual data files and accompanying notes as found on www.codal.ir.,. Descriptive statistics (i.e., mean, maximum, minimum and standard deviation) and inferential statistics (i.e., Structural Equation Modelling (SEM)) are used For statistical analysis and to test hypothesis. Collected data was calculated via the Excel software and was analyzed using Eviews-9, SPSS-22, and also PLS. In this research, the information content of companies’ income and its criteria regarded as dependent variable, audit quality and its criteria regarded as independent variables and weaknesses of internal control and its criteria act as mediating variable. 4- Results Research results showed that internal control weaknesses related to financial reporting have a mediating role on the relationship between indicators of companies’ income information content and audit quality. However, generally internal control weaknesses related to operations, laws and regulations do not play such a role. These findings can improve the information content of accounting earnings thorough the audit quality. 5- Discussion and Conclusion The companies’ income information content is an important determinant of investors' decisions, and in particular on decisions about a dealing strategy. The goal of this research was to study the effects of audit quality on the companies’ income information content through the mediation of internal control weaknesses for the companies listed in the TSE. This study would enhance our understanding of companies’ income information content when facing various degrees of the audit quality. Furthermore, the results might be able to resolve the seemingly conflicting predictions from prior analytical models and will provide some implications for regulatory agencies' future policy setting. One important suggestion is that, investors be recommended to pay attention to the information related to the auditor of the company and its features as a factor affecting the companies’ income information content.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
321
353
https://jaa.shirazu.ac.ir/article_5423_901eb16f52fd465e393a81d032e8351f.pdf
dx.doi.org/10.22099/jaa.2019.32907.1847
Firms' Political Connections and Pays Policies to Board of Directors
Mohammadreza
Mehrabanpour
Assistant Professor of Accounting, University of Tehran
author
Mohammad
Jandaghighomi
University of Tehran
author
text
article
2019
per
The purpose of this study is to investigate the impact of corporate political connections on the compensation policies of board of directors. The sample of this research includes 207 companies listed in Tehran Stock Exchange for the years 2008 to 2019. Also, multivariate regression models with Feasible Generalized Least Squares (FGLS) method have been used to test the research hypothesis in a panel data set. The results showed that the political connections of the companies have a significant and negative effect on the level of pay of the board of directors, but have no significant effect on the performance-payment relationship of the board of directors. It was also found that corporate political connections significantly reduce the payment gap between the board of directors and employees. 1- Introduction In developing countries like Iran, political figures have a large presence in the capital market. According to existing literature, political connections can affect the corporate policies of business units. The purpose of the present research is to investigate the effect of corporate political connections on the payment policies to the board of directors from the three dimensions of the amount paid to the board of directors, the effect on the relationship between the performance and the payment of the board and the dispersion of payments in the organization. In order to explain the effect, four theories in the literature of accounting and payment policies in the organization have been used including theories of social comparison, government governance, political costs and agency. The theory of social comparison states that the presence of political figures in companies will be accompanied by safeguarding of social values and conventions, and in this regard the political companies will reduce the level of payment to the board, weakening the relation between performance and payment, and reducing the payment dispersion in the organization. Based on the theory of government governance, the goal of political figures is to fill the pillars of corporate governance with the goals of government governance, by increasing the payment to the board, weakening the relationship between performance and payment to the board, and increasing the pay dispersion in the organization. Based on the theory of political costs it has been stated that political firms have the potential opportunity to make more unusual payments to the board, because they are supported by government political power. Hence, it is expected that unusual payment to the board, strong relationship between firm performance and the board payment and much payment dispersion will be more likely in the organization. Finally, the agency theory states that the presence of political figures in the company is accompanied by a reduction of unconventional payments to the board of directors, the strengthening of the relationship between the firm performance and the payment of the board of directors, and the increase in payment dispersion in the company. 2- Hypothesis Due to the existence of competing theories, the influence of corporate political connections on the payment policies to the board is studied by three without direction hypothesis as follows: H1: The political connections of companies have a significant effect on the level of payment of the board. H2: The political connections of companies have a significant effect on the relationship between firm performance and board payment. H3: The political connections of companies have a significant effect on the dispersion of payments of the board of directors and employees. 3- Methods The statistical population of the present study is all companies listed in the Tehran Stock Exchange between 2008 and 2019. In order to select the companies under study, such criteria as admission to Tehran Stock Exchange, lack of presence in the financial and investment industries, the end of the fiscal year ending to March and the availability of information have been considered. Accordingly, 207 companies were selected as study samples. Data needed for research is collected from information banks affiliated with Tehran Stock Exchange and official website of the companies. The research hypothesis has been tested by multivariate regression model with Feasible Generalized Least Squares (FGLS) method on a panel data set. In order to analyze the data, Excel, EViews and Stata software have been used. 4- Results The first hypothesis of the research was confirmed at a significant level of 5%. In other words, the political connections of the companies have a negative and significant effect on the amount paid to the board. The second hypothesis of the research was not approved at any level of statistical significance. In other words, based on the empirical evidence, it cannot be verified that political connections have a significant impact on the relationship between the performance and payment of the board of directors. The third hypothesis of the research was confirmed at a significant level of five percent. In other words, the political connections of the companies have a positive and significant effect on the compression of payment in the company. 5- Discussion and Conclusion The results of the first hypothesis test showed that the political connections of the companies had a negative and significant effect on the board's payment. This evidence is consistent with the prediction of social comparison. In other words, the presence of political connections in Tehran Stock Exchange companies will be significantly related to controlling the level of payment to the board of directors. In contrast, in private companies due to the lack of supervision of political figures, they provide higher levels of payment to their board of directors. Also, by testing the second hypothesis of the research, it was found that the political connections of the companies did not have a significant effect on the relationship between the firm's performance and the payment of the board. In this regard it can be stated that in compliance with the prediction of agency theory, management's compensation in TSE's companies has strong connection with performance as the presence of political figures cannot create any significant effect on the circumstance. By examining the third hypothesis of the research, it was observed that the political relationships of the companies have a positive and significant effect on the compression of the board and staff pay. As a result, based on the forecast of social comparison theory, it can be argued that the presence of political figures increases the equality of payment in the firm so that they can meet the social values of Iranian people.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
355
386
https://jaa.shirazu.ac.ir/article_5481_6c078325a2a657c49ea949d1232faea8.pdf
dx.doi.org/10.22099/jaa.2019.28043.1667
The effect of Competition Proprietary Costs on relationship between sales and cash flow Instability and Financial Statement Comparability
Seyed ali
Vaez
Associate Prof in Accounting. Faculty of Economic and Social Sciences, Shahid Chamran University, Ahvaz, Iran
author
Rahim
Bonabi Ghadim
Asistance Prof in Accounting, Department of accounting, Hashtrood Branch, Islamic Azad University, Hashtrood, Iran
author
text
article
2019
per
The more comparable of financial statements, the lower the information asymmetry and so capital market is more efficient, which results in the optimal allocation of resources. The purpose of this study was to investigate the effect of Proprietary Costs of Competition on relationship between sales and cash flow Instability and Financial Statement Comparability in the companies Accepted in Tehran Stock Exchange. To test research hypothesis, the data of 126 companies accepted in Tehran Stock Exchange during the years 2009-2017 and multivariate regression has been used. The results show that sales fluctuation has a significant negative effect on the Financial Statement Comparability, and this effect is aggravated by the involvement of the Proprietary Costs of Competition (R & D expenditures). However, the cash flow fluctuations and sales growth fluctuations and their interactive effect With Proprietary Costs of Competition (R & D expenditures) have no significant effect on Financial Statement Comparability. 1- Introduction One of the information channels about the status of companies is information about the financial statement comparability. The more comparable financial statements, the lower the information asymmetry and so capital market is more efficient, which results in the optimal allocation of resources. The purpose of this study was to investigate the effect of proprietary costs of competition on relationship between sales and cash flow instability and financial statement comparability in the companies accepted in Tehran Stock Exchange. 2- Hypothesis The proprietary costs of disclosing information is a cost that the organization will incur due to the disclosure of its confidential information and its potential use by its competitors. Increasing the competition proprietary costs leads to a reduction in the voluntary disclosure of information, information management and earning manipulation, which reduces the comparability of information. Competition will reduce the earnings and cash flows fluctuation and reduce the need for smoothing the profits. On the other hand, given the fact that the market punishes companies that have not achieved the expected performance, company managers with more competition and lower proprietary costs are more likely to smooth cash flows and fluctuate their profits. Ultimately, any earning management and smoothing, on the one hand, will reduce the fluctuations in the company's performance in the form of profits and cash flows (low risk showing the results of the company's activities), and, on the other hand, reduce the information quality and the ability to compare financial statements. In this regard, the assumptions are as follows: H1: The sales fluctuation affects the financial statements comparability. H2: The sales growth fluctuation affects the financial statements comparability. H3: The cash flows fluctuation affects the financial statements comparability. H4: The competition proprietary costs moderate the effect of sales fluctuation on financial statements comparability. H5: The competition proprietary costs moderate the effect of sales growth fluctuations on financial statements comparability. H6: The competition proprietary costs moderate the effect of cash flow fluctuations on financial statements comparability. 3- Methods To test research hypothesis, the data of 126 companies accepted in Tehran Stock Exchange during the years 2009-2017 was extracted and multivariate regression was used. 4- Results The results show that sales fluctuation has a significant negative effect on the financial statement comparability, and this effect is aggravated by the involvement of the proprietary costs of competition (R & D expenditures). However, the cash flow fluctuations and sales growth fluctuations and their interactive effect with proprietary costs of competition (R & D expenditures) have no significant effect on Financial Statement Comparability. 5- Discussion and Conclusion The sales instability relative to the sales growth and cash flows instability is more of a use by ordinary shareholders and investors in determining the information quality and thus determining the value of the company. In addition, the proprietary costs of competition in form of disclosing more information, due to more fluctuations in current period performance than future periods, reduces the quality and comparability of information more and more.
Journal of Accounting Advances
2008-9988
11
v.
2
no.
2019
387
419
https://jaa.shirazu.ac.ir/article_5476_9807fc63b5cd382c7ba6e4847d8d8495.pdf
dx.doi.org/10.22099/jaa.2019.33538.1871