Corporate Life Cycle, Risk-Taking and Investor Sentiment: Evidence from Tehran Stock Exchange
Mohammad Ali
Aghaei
Associate professor, Tarbiyat Modarres University, Tehran
author
Mohammad
Norouzi
کارشناس ارشد حسابداری دانشگاه شهید چمران اهواز
author
Morteza
Bayat
PHD Student in Tarbiyat Modarres University, Tehran
author
Mohammad
Mohebkhah
MSc Accounting, Kharazmi University, Tehran
author
text
article
2018
per
Introduction One of the most important economic features of companies is the life cycle. According to the life cycle theory, the importance of risk and performance indicators varies over the life cycle stages. This research studies the impact of life cycle stages and investor sentiment on risk-taking behavior of managers and shareholders. The company's risk-taking is the uncertainty about the prediction of future cash flow and the company's future interest in new investments (Wright et al., 1996). Risk-taking has impact on firm's growth, performance and survival (Bromiley, 1991), on the other hand, in research, risk-taking is considered as a serious agency problem (Low, 2009). Hypotheses H1: Risk-taking at the start and growth stages is more than the stages of mature and decline stages of life cycle. H2: Investor sentiment has a direct and significant impact on risk-taking in the life cycle stages. Methods We base our sample selection on all of the firms listed on the TSE (Tehran Stock Exchange) during 2005-2016. The sample consists of 170 TSE firms. Our basic methodology involves multiple regressions using Panel Data method. The models are estimated with OLS and GLS. Main models are: Variables definitions are coming below: The dependent variable is the risk-taking (Risk). For calculation of risk-taking, two indexes are used, one is standard deviation of return on assets (corporate risk-taking measure) over the past three years as the main criterion and the other is standard deviation of stock returns (investor risk-taking measure) over the past three years as benchmark. Independent variable of the research is the stages of the company's life cycle and the moderator variable are also investor sentiment. The approach of Hassan et al. (2015) and DeAngelo et al. (2006) (ratio of retained earnings to asset) was used for categorizing companies into the life cycle stages. The smaller this ratio is, it implies firm in start and growth stages of life cycle, and vice versa, the larger ratio implies firm at the mature and decline stages of life cycle. Investor sentiments following Baker & Wurgler (2002), Polk and Sapienza (2009), Alzahrani and Rao (2014), and Hasan & Habib (2017) through rate of stock turnover (average of daily trading volume adjusted based on the percentage of free float shares) are measured; the smaller this ratio is, the longer investor sentiment (due to the low volume of transactions) is. There are seven control variables as Habib and Hasan (2017) propose in the models: Size: Size is calculated through the natural logarithm of the total assets. Market-to-book (MTB) Ratio: The ratio of market value to book value of equity. Leverage: Leverage is equal to the total debt divided by total assets. Capital expenditure (CapEx): In terms of gross investment expense for dividends, interest and purchases of fixed assets, less the funds received for the sale of fixed assets and then divided by the total assets. Sales growth (SG): is equal to annual sales changes over two consecutive years, divided by the base year sales volume, to calculate sales growth. Age: The purpose of the company's life is the number of years of membership in the stock exchange, which is used to calculate this variable from the natural logarithm of number one plus the number of years of membership in the stock exchange. Profit Margin (PM): The margin is equal to the net profit before tax divided by sales. Discussion and Conclusion The results of the first hypothesis showed that the risk-taking of managers in the stages of emergence and growth is more than the stages of mature and decline, which is consistent with the results of Hassan and Habib (2017). Generally, it is believed that corporate risk-taking should be a response to the company's life cycle. It is expected that companies at the stage of the emergence take more risks for the development of the company according to the corporate strategy. The manager's curriculum stimulates the company to carry out the initial investment thus forcing competitors to enter the capital market (Spence, 1977, 1979, 1981; Porter, 1980; Jovanovich, 1982). The results of the second hypothesis also showed that increasing investor sentiment cause increases in the risk-taking of managers in the life cycle stages. The result of the second hypothesis is also consistent with the results of Hassan and Habib (2017). Companies in the emergence stage are more vulnerable to market mispricing with high or low investor sentiment, since the initial investment of the company, especially in the field of research and development, leads to an increase in ambiguity and uncertainty due to the inherent information asymmetry surrounding the company. The discrepancy of pricing uncertainty with its constituent elements takes longer in research and development costs of other investments (Poluk and Sapienza, 2009).
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
1
29
https://jaa.shirazu.ac.ir/article_4974_c768567a5eba3a6097fbaff48c07ff5b.pdf
dx.doi.org/10.22099/jaa.2018.27432.1647
Investigating the Factors Affecting the Audit Quality from the Viewpoints of Independent Auditors and Financial Managers of Companies Accepted in Tehran Stock Exchange
Fatah
Behzadian
ebtekar hesab aria audit firm/ audit manager
author
Naser
Izadi Nia
isfahan university
author
text
article
2018
per
Introduction The desire to gain long-term benefits in the field of professional credit and earnings has led to considering audit quality as a factor of increasing professional competitiveness in audit services' market from the viewpoint of auditors, and from this perspective, this has been considered in conducted studies. Palmrose (1988) defined the quality of the audit as follows: ensuring the financial statements is audit quality and the financial statements are free from any significant misstatement". This definition emphasizes the result of the audit, because the ability to rely on financial statements before the audit cannot be specified; therefore, the actual quality of the audit cannot be observed and cannot be evaluated until the audit has reached its result (Hasas Yeganeh and Azinfar, 2010). Titman and Trueman (1986) also believe that since actual audit quality cannot be observed before auditing or during auditing, there is a need for variables to evaluate the actual quality of the audit. Although many factors affect the quality of audit services, few studies have been conducted to create a conceptual framework or model for describing the structure of quality of audit services. In recent decades, some of the studies conducted in the field of audit quality have attempted to provide an analytical framework based on audit regulations in European countries, as well as the results of previous studies, including Carcello et al. (1992), Knechel et al. (2013). Of course, the study results of Francis (2011) and Gonthier Besacier et al. (2016), which provide the analytical framework for a more complete audit quality according to the results of previous studies and European audit regulations (especially French), and are more similar to Sarbanes Oxley regulatory texts, have been great efforts in this field. This study by formulating factors affecting the quality of audit according to the results of studies conducted and solutions presented in Iranian auditing standards regarding the quality improvement of audit services and presenting them in the form of a conceptual model attempts to consider single and distributed factors affecting the quality of audit based on previous studies in the form of the main and operational factors. Hypotheses The hypotheses of this research are as follows: H1: Audit operations affect audit quality. H2: Audit group activity affects audit quality. H3: Auditing rules affect audit quality. Methods The information needed to test the research hypotheses have been obtained through a researcher-made questionnaire. The first statistical population of this study consists of CPA’s working in an independent audit profession as managers, senior managers, supervisors and senior supervisors (in the audit firm), partners, technical managers, audit supervisors and senior supervisors (in private audit firms), and the second statistical population of this study consists of financial managers of all investment companies that operate under the supervision of Securities and Exchange Organization. The sampling method in this study is a categorized probability sampling method for the first statistical population of this study. The subjects are selected from all classes conveniently. For this reason, we used Cochran formula to estimate the sample size in each class of the statistical population. Among the numbers obtained as the sample size of each class, the largest value was chosen as the final sample size. The final sample size obtained from this study was n = 205 for the first statistical population and n = 74 for the second statistical population of all investment companies operating under the supervision of Securities and Exchange Organization and questionnaires were distributed to respondents through in person referring and / or sent by email. After distributing the questionnaires, in total, 174 questionnaires were collected. 6 questionnaires were unusable due to failure to answer all questions, and a total of 168 questionnaires were used in statistical analysis. Regarding the theoretical concepts presented on the quality of the audit, this concept cannot be observed; therefore, the dependent variable is hidden and endogenous, and the independent variables are also hidden, but are exogenous. Consequently, the evaluation of the conceptual model of the research to study the research hypotheses based on the structural equations modeling with partial least squares approach was conducted to study the causal relationships between the invisible and hidden variables with interwoven relationships. Discussion and Conclusion The factors affecting the audit quality in three fields of audit operations, audit regulations and audit group are presented in the form of a conceptual model based on the analytical framework based on previous conducted studies. Regarding theoretical concepts of audit quality, this concept cannot be observed. As a result, the evaluation of the conceptual model of the research to test the research hypotheses based on the structural equations modeling with partial least squares approach was used to study the causal relationships between the visible and hidden variables with interwoven relationships including four reflective measurement models and a structural model. After testing validity and reliability of reflective measurement models, the general test of these models and testing the quality of the structural model for the research hypotheses, it was found that the null hypothesis was rejected in the test of all three hypotheses that is the claim contradiction, indicating that all the hypotheses of the research were confirmed and the above factors affect the quality of audit services. The results also indicate the general utility of the general structural model designed to predict the factors affecting the quality of the audit services. According to the conceptual model, 20 qualitative features were presented to review them. The study of the effects of all exogenous independent variables (audit operations, audit group and audit regulations) on the endogenous dependent variable of the model (audit quality) showed that the independent variable of audit operations with a direct effect factor of 0.431, independent variable of the audit group with a direct effect factor of 0.299 and independent variable of audit regulations with a direct effect factor of 0.253 in total could explain 79.6 percent of the total variation in audit quality.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
30
63
https://jaa.shirazu.ac.ir/article_4975_b60f4df34e33178dbf88d5f427f676ea.pdf
dx.doi.org/10.22099/jaa.2018.25885.1578
Investigating Investors' Reaction to firms’ Annual Earnings Announcement with considering the market uncertainty and information uncertainty
Narges
Hamidian
P.h.D Student of Accounting, Faculty of Administrative Sciences and Economics, University of Isfahan, Iran
author
Mehdi
Arabsalehi
Associate Prof. of Accounting, Faculty of Administrative Sciences and Economics, University of Isfahan, Iran
author
Hadi
Amiri
Assistant Prof. of Economy, Faculty of Administrative Sciences and Economics, University of Isfahan, Iran
author
text
article
2018
per
Introduction There is an ambiguity about future state of the firms and capital market in conditions of uncertainty. In such a situation, the arrival of any information signal such as earnings announcement may reduce uncertainty leading to a revision of the previous beliefs of investors. Uncertainty could be divided into two groups: market uncertainty and information uncertainty. Investors’ reaction to earnings announcement may be different in these two situations. Under high market uncertainty, firms’ earnings announcement as an information signal may have a greater impact on investors' beliefs and, as a result, leads to more investors’ reaction to firms’ earnings announcement. However, more accurate information signals have a stronger impact on investors' beliefs. In other words, there is under reaction to earnings announcement, when announced earnings contain high uncertainty. Therefore, this study attempts to investigate investors’ reaction to earnings announcement with regards to market and information uncertainty. In addition, this study examines simultaneous effect of these two types of uncertainty on the investors 'reaction to earnings announcement. Hypotheses According to the literature, the research hypotheses include: H1: Under high market uncertainty, investors’ reaction to earnings announcement is higher than low market uncertainty. H2: Under high information uncertainty, investors’ reaction to earnings announcement is less than low information uncertainty. H3: Investors’ reaction to earnings announcement under market uncertainty decreases with an increase in the level of information uncertainty. Methods In this study, in order to calculate the variables and test the hypotheses, required data was collected from the audited financial statements and its footnotes of listed companies in the Tehran Stock Exchange and the existing databases including “Rahavard Novin” and “Codal”. The sample of this study consists of 162 listed companies in Tehran Stock Exchange from 2005 to 2015. Market uncertainty was measured by the standard deviation of daily market returns during the one month prior to the firms’ earnings announcement. Information uncertainty was calculated by two criteria including quality information and cash flows volatility based on matched-firm design. Panel data method and Wald test were used to estimate models and test of hypotheses, respectively. Results Results showed the higher market uncertainty (compared to lower uncertainty), the more investors' response to firms’ earnings announcements. Results also showed, the higher information uncertainty (compared to lower uncertainty), the less investors' response to firms’ earnings announcements. Moreover simultaneous analysis of the "market and information" uncertainty on the investors' reactions to earnings announcements showed although investors' responses to earnings announcements decrease on the high information uncertainty situation, yet unexpectedly, the coefficient of unexpected earnings in the high market uncertainty is less than its coefficient in the low market uncertainty. Discussion and Conclusion Previous studies often focus on the market uncertainty or the information uncertainty. There are few studies that examine the simultaneous effect of these two types of uncertainty. Therefore, the aim of this study was investigating investors’ reaction to earnings announcement considering both market and information uncertainty. In the first hypothesis, we investigated investors’ reaction to earnings announcement, when market uncertainty is high. Results showed, investors show more reaction to earnings announcement under high market uncertainty. Therefore, the first hypothesis is not rejected. Results of the second hypothesis indicated when firms’ information such as accounting earnings is ambiguous and uncertain, there are less investors’ reaction to earnings announcement and the second hypothesis is also not rejected. Moreover, simultaneous analysis of both uncertainty on the investors' reaction showed although investors' responses to earnings announcements decrease by an increase in the information uncertainty, but unexpectedly, investors show less reaction, when there is a high market uncertainty. It may be due to behavioral bias or lack of investor knowledge for analyzing information. Therefore, the third hypothesis is rejected.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
64
97
https://jaa.shirazu.ac.ir/article_4976_f6935957e0bfac2ab9c34a14f1c7e379.pdf
dx.doi.org/10.22099/jaa.2018.27132.1631
Assess different aspects of the company's growth in different periods of product diversification
Hosein
Sajadi
Professor of Accounting Department of Shahid Chamran University, Ahvaz, Iran.
author
Javad
Nikkar
Assistant Professor of Accounting, East Tehran Branch, Islamic Azad University, Tehran, Iran.
author
Saeed
Hajizadeh
Ph.D. Student in Accounting, Shahid Cahmran University, Ahvaz, Iran.
author
text
article
2018
per
1) Introduction The aim of this paper is to investigate different aspects of the company's growth (Includes sales growth, employment and assets) in different periods of of product diversification (Early courses, during and after diversity) in companies listed in TSE. In general, in this study, diversity is considered as an innovation. 2) Research Questions or hypothesis H1: Employment growth have significant relation with product diversification in before, during and after of diversification. H2: Revenue growth have significant relation with product diversification in before, during and after of diversification. H3: Asset growth have significant relation with product diversification in before, during and after of diversification. 3) Methods This study employs financial data of companies listed on Tehran Stock Exchange during 2003-2016 periods, and the fix effect panel data regression model was used to test hypotheses. 4) Results According to theoretical considerations, it was expected that the relationship between the growth and diversity of the product in the previous period was a positive and positive variation during and after the diversification. In this regard, Statistical analysis of data shows that Employment growth, Revenue growth and Asset growth are positively associated with product diversification in before and during the diversification process, but this relation is not significant in after of diversification process.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
98
125
https://jaa.shirazu.ac.ir/article_5708_08ead73fd0753d4d622181703c3f5c23.pdf
dx.doi.org/10.22099/jaa.2020.37587.2025
The Study of the Effect of Measurement Subjectivity on the Forecasting of Persistent and Non-Persistent Components of Earnings by Financial Analysts
Neda
Ghayoomi
Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
author
Afsaneh
Soroushyar
Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
author
Saeid
Ali Ahmadi
Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
author
text
article
2018
per
Introduction Based on conceptual framework of financial reporting, the primary purpose of financial reporting is to assist the investors to make economic decisions. Therefore, understandability of financial statements is very important to them. The correct method of classification is one of the ways to improve the understandability of financial statements. Many researchers believe that classifying earnings items based on their underlying attributes is useful for forecasting and valuation. Previous studies showed that persistence classifications lead to better prediction (Fairfield et al, 1996). In addition, subjectivity is another attribute that is important for investors and analysts. Persistence is the extent to which an earnings item is indicative of its future amount and subjectivity is the extent to which managers use judgment to measure the amount of the earnings item (Hewitt et al, 2015). In previous studies, persistence and measurement subjectivity classifications are displayed separately in financial statement. This research is based on two streams of literature on subjectivity and persistence and investigates both subjectivity and persistence clarifications in financial statement. In measurement subjectivity, intentional and unintentional errors are increased. Thus, when the measurement subjectivity is high, it seems that persistence classification is misreported. In other words, if management classifies the special items as a high persistence, analysts expect that they have low persistence. In addition, if management classifies the earnings item as a low persistence, analysts perceive that this item is high persistence. Therefore, when measurement subjectivity is in high level, analysts rely less on persistence classifications for forecasting. Accordingly, combining persistence and measurement subjectivity classifications improve the predictive content of reported earnings and are used by analysts and investors. Previous studies often investigated the sequential format to present the earnings items in income statements. In this format, the persistence and measurement subjectivity classifications are displayed separately (Schkade and Kleinmuntz, 1994). Although the sequential format has been considered by standard setters, psychology theory supports the usefulness of matrix format. Because in this format persistence classifications are displayed on rows and measurement subjectivity classifications are displayed on columns. In matrix format analysts require acquiring only one value to process both classifications, while the sequential format sometimes requires analysts to acquire values across multiple columns to process these classifications. Thus, matrix format facilitates analysts’ processing of the classifications (Hewitt et al, 2015). Hypotheses This paper has two purposes. Firstly, the effect of the persistence and subjectivity classification on the prediction of analysts is investigated. Second, it examines the effect of the presentation format of income statement on the analysts’ forecast. Methods This research in terms of purpose is applied 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, the questionnaire of Hewitt et al (2015) research is used. The statistical sample of research includes 136 analysts participating in Tehran Stock exchange selected by available sampling method. The period of research is 2017 and its subject field is behavioral accounting. Results The results show when forecasting a high persistence earnings item, analysts forecast a lower amount when measurement subjectivity is high. In addition, when forecasting a low persistence earnings item, analysts forecast a lower amount when measurement subjectivity is high. These results hold both sequential and matrix format. The other results indicate the presentation format of income statement has not significant effect on analysts forecasting. Discussion and Conclusion In general, it is inferred from the findings of the present research that when the measurement subjectivity is high, analysts rely less on this item and forecast a lower amount. The measurement subjectivity and persistence classification affect analysts’ forecasting. Therefore, it is useful to classify the earnings item in income statement. Moreover, because of having expertise, the presentation format doesn’t affect analysts in earnings items processing and their forecasting.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
126
148
https://jaa.shirazu.ac.ir/article_4981_14d0c6322386929d6b615343d573e011.pdf
dx.doi.org/10.22099/jaa.2018.27028.1623
Comparative study of different levels of industry concentration on financial indicators
Behzad
Kardan
استادیار حسابداری دانشگاه فردوسی مشهد
author
Mehdi
Moradi
دانشیار حسابداری ،دانشگاه فردوسی مشهد
author
Bahareh
Haghighitalab
دانشجوی دکترای حسابداری ،دانشگاه فردوسی مشهد
author
text
article
2018
per
Introduction Industry concentration affects firms' various financial and operational aspects. This study aims at examining its effect on selected financial indexes including earning persistence, stock return, firm growth, and rate of profitability in Tehran stock exchange listed companies from 2012-2016. To measure industry concentration (as independent variable), Herfindahl index based on three factors, sales, assets and equity, was used. Based on this index, observations were classified in 5 groups in accordance with their combined scores. Results showed that industry concentration in its maximum level has a negative effect on earning persistence, while in its minimum level this effect is negative on stock return, and nonsense on other levels. Although a negative decreasing effect of industry concentration was documented on firm growth in all 5 levels, its weak positive significant effect on profitability was also recognized in higher than average levels of industry concentration. Hypotheses The aim of the study is to examine the effect of industry concentration on selected financial indicators. Thus, research hypotheses were developed as follows: H1: There is a significant relationship between industry concentration and earning persistence in Tehran Stock Exchange listed companies. H2: There is a significant relationship between industry concentration and stock return in Tehran Stock Exchange listed companies. H3: There is a significant relationship between industry concentration and firm growth in Tehran Stock Exchange listed companies. H4: There is a significant relationship between industry concentration and rate of profitability in Tehran Stock Exchange listed companies. Methods The data required for the research were gathered through existing data of Tehran Stock Exchange listed companies' financial statements. After adjusting the statistical population for the defined limitations according to research aims, 212 companies in 5 years, (1060 observation) remained in 11 industries. Firstly, to measure the research independent variable (industry concentration), Herfindahl index was used in three independent times based on firms’ sales, total assets and equity, and each time according to a comparison of each firm with the industry average index, a score of 1 to 5 was allocated to the observation. “5” stands for maximum concentration and “1” for minimum concentration. Then the average of obtained scores was used to ultimately define the state of each firm’s industry concentration level. Then 4 independent models were used according to the literature to test the study hypothesis. Results The first hypothesis was supported suggesting that there is a significant level between industry concentration and earning persistence, increasing industry concentration, up to the 3rd level increasing the earning persistence (EP), but upper levels will cause EP to decrease. The second hypothesis was also supported by the data. In first and second levels of industry concentration, a negative significant relation was confirmed, where increasing the industry concentration leads to decreasing of its effect on stock return. Research data support the third hypothesis. In all 5 levels, industry concentration has a significant effect on firm growth and its negative decrease in upper levels gradually. The fourth hypothesis was not supported. No significant effect was observed between industry concentration and profitability in three top levels. Discussion and Conclusion Different decisions about different investment options encourage rational investors to evaluate the company's various financial indicators. Since the product market competition can be effective in manager’s financial and operational decisions, it affects the financial indicators. Therefore, it is important to understand how product market competition has an effect on financial indicators. The present study investigated the combined criteria of industry concentration on 4 financial indexes; including earning persistence, stock return, firm growth and profitability. Research hypotheses were test in 5 level of industry concentration. Results showed that proper interpretation and comparison of financial indicators by investors due to the competition in the industry is important. For example, the present study showed that an increase in industry concentration from Q1 level to Q3 will increase its positive effect on earnings persistence, but in its highest level, industry concentration (Q4 & Q5), has a negative effect on earnings persistence. In lower levels of industry concentration, its negative effect on stock return was documented. While its effect is negative and decreasing on firm growth, it has a positive effect on profitability in three top levels (Q3 to Q5). Thus, in interpreting the studied financial indexes, the state of competition in the industry is important. Therefore, none of the mentioned indicators should to be considered alone, without considering the level of industry concentration (competition).
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
149
186
https://jaa.shirazu.ac.ir/article_4977_f06177f13c6b6272702ea65eb1103910.pdf
dx.doi.org/10.22099/jaa.2018.25763.1573
Impact of social responsibility disclosure on accounting, economic and market based Measures Of corporate performance evaluation
Gholamreza
Kordestani
Associate Professor of Accounting at Imam Khomeini International University
author
Sayed karim
Ghaderzadeh
Payame Noor University, Saghez
author
Hamid
Haghighat
Associate Professor of Accounting at Imam Khomeini International University
author
text
article
2018
per
Introduction From the earliest classic studies by Bowen (1953), Carroll (1979), Friedman (1984), the importance of Corporate Social Responsibility (CSR) and its impact on society have been explored from various viewpoints. However, their opinions are divided on the need for Corporate Social Responsibility. Some studies with a positive appraisal of corporate social responsibility argued that a corporation has a duty to society, whereas others such as Friedman (1962, 1970) reported that a corporation only has the duty to maximize its benefit within the fence of law and minimum ethical restrictions. Summarizing literature shows that the literature findings have been mixed until now, and so further research is needed. On this basis, the aim of this paper is to examine the impact of social responsibility disclosure on accounting, economic and market-based Measures of Performance Evaluation of Iranian Companies. The purpose of this study was to conduct research on whether corporate social responsibility have a significant relationship with corporate performance evaluation in terms of accounting-based measures (return on assets and earnings per share), Economic based measures (Economic value added and market value added) and Market based measures (Stock returns and Cost of Capital). Hypotheses H1: Social responsibility disclosure has positive effects on accounting-based measures of corporate performance evaluation. H2: Social responsibility disclosure has positive effects on economic based measures of corporate performance evaluation. H3: Social responsibility disclosure has positive effects on market-based measures of corporate performance evaluation. Methods The research includes a sample of 104 companies (1040 firm – years) in the Tehran Stock Exchange for a period of 10 years from 2006 to 2015. In this research, corporate social responsibility is an independent variable, and corporate performance evaluation (accounting-based measures, Economic based measures and market-based measures) is the dependent variable. Content analysis was used to extract information about corporate social responsibility initiatives and in order to measure social responsibility used environment, products and services, employees, social, cultural-ideological and energy involvement dimensions. In accordance with previous studies, 1 indicates presence of CSR information and 0 if otherwise to measure social responsibility of companies. Measures of financial performance and control variables were collected from the annual reports. Testing of hypotheses was conducted by applying multivariate regression techniques utilizing longitudinal data analysis of company’s annual reports. Two well-established models firm-year approach (Using fixed effects model and random effects model) and industry-year approach (Using pooled OLS) are conducted in this paper. Results This study attempts to address the question whether corporate social responsibility is linked to financial performance. Using empirical methods, we tested the sign of the relationship between corporate social responsibility and corporate performance evaluation. The results indicate that corporate social responsibility disclosure has a direct and significant effect on the rate of return on assets, Earnings per share and economic value added. Also, corporate social responsibility disclosure has an inverse and significant effect on the cost of capital. In other words, increasing the level of corporate social responsibility disclosure reduces information asymmetry, reduces risk and finally reduces cost of capital. Finally, it is revealed that corporate social responsibility disclosure has no significant effect on Stock returns and market value added. Discussion and Conclusion The results of the research show that although the impact of social responsibility of Iranian firms and their impact on the financial performance is low and there is a great distance to achieve the desired outcome, however, based on the theory of stakeholders, Iranian firm managers are trying to provide a better image of company in the society. Because firms will earn higher profits due to their reputational premium. On the other hand, managers have used social activities as a strategy to increase the firm’s economic benefits. In addition, our findings are consistent with the literature that states that corporate social responsibility is negatively related to the cost of capital. We suggest that Iranian firms increase their corporate social responsibility activities, which could be a communication tool between firms and investors and reduce both the firms ‘cost of capital and information asymmetries. Considering the negative relationship between social responsibility and cost of equity, it is suggested to the organization directors to consider the concept of social responsibility as the organization’s survival factor in the long run and take stronger actions regarding their social performance enhancement. Lastly, it is suggested that Tehran Stock Exchange adopt rules to be able to measure and determine, as much as possible, the real rate of CSR during their years of activity.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
187
217
https://jaa.shirazu.ac.ir/article_4978_16a97e3392e49e1030e2936b4a1eb2fa.pdf
dx.doi.org/10.22099/jaa.2018.26236.1596
A study on the relationship between Cost leadership strategy, Market Competition, and earnings management in the Tehran Stock Exchange (TSE)
Mehdi
MeshkiMiavagii
دانشیار گروه حسابداری ،دانشگاه پیام نور
author
Sina
Kheradyar
Assistant professor, Faculty of Accounting, Islamic Azad University
author
Naghmeh
Hasanzadeh
M.S in Accounting, Azad University, Rasht, Iran
author
text
article
2018
per
Introduction In this study, we use Porter’s (1980) organizational strategy typology to examine the impact of leadership cost, as one of the trading strategies, and market competition on real earnings management. By doing so, we provide evidence on whether cost leadership strategy is one of the underlying determinants of earnings management. Furthermore, we examine the interactions between cost leadership strategy and market competition and its impact on earnings management, providing evidence on whether an external contributing factor such as market competition may have incremental influence over earnings management through its impact on an internal factor such as business strategy. Business strategy, as an important factor affecting internal governance mechanism (Miles and Snow, 1978, 2003; Ittner et al., 1997) has received little attention on its impacts upon earnings management. Our study, for the first time, attempts to explore whether cost leadership strategy maybe an underlying determinant of earnings management. Hypotheses Based on the theoretical literature and the conducted studies, research hypotheses were developed as follows: First main hypothesis: Product market competition affects accounting information quality. The minor hypotheses are: H1: Cost leadership strategy is positively associated with the level of earningsmanagement. H2: The interaction of market competition and cost leadership strategy will exhibita positive relationship with earnings management. Methods The research methodology is a quantitative research that adopts the scientific method and empirical evidence, based on hypotheses and ex-post research designs. This type of research is utilized when criteria data quantitative are used. In this research, data of 128 companies are analyzed for the period of 2010-2015. The related data was collected through observation of Iranian database of the Tehran Stock Exchange (Tadbir Pardaz), annual data files and accompanying notes as found on www.rdis.com. For statistical analysis and to test hypotheses, descriptive statistics (i.e., mean, maximum, minimum and standard deviation) and inferential statistics (i.e., unit root test, enter multiple linear regression and analysis of variance) were used. Collected data was calculated via the Excel software and was analyzed using Eviews-9. In this study, we use real activities manipulations to measure earnings management. Consistent with prior research (Roychowdhury, 2006; Cohen and Zarowin, 2010; Zang, 2012), we use three measures to capture real activities manipulations: (1) abnormal production costs caused by manipulations of manufacturing process; (2) abnormal operating cash flows caused by manipulations of sales activities; and (3) abnormal discretionary expenditures caused by manipulations of expenditures activities. Herfindahl-Hirschman index was employed as a proxy for the industry-level market competition and the share index (SHARE) was used to measure firm-level competition. In this study Asset Turnover of Operation (ATO) index was employed as a proxy for cost leadership strategy. Firms use the cost leadership strategy to achieve its uniqueness in an industry through lowering costs. A high AT means that the firm is more capable of obtaining revenues through efficient business operations and utilizing its resources well, which indicates that the firm is positioned more toward a cost leadership strategy. Results The result shows that leadership cost strategy has significant relation with real earnings management. The positive relation among leadership cost strategy and earnings management indicates that the companies with leadership cost strategy has tend to high earnings management. Moreover, the earnings management can intensify by using leadership cost strategy and increasing the level of competition. Discussion and Conclusion In this study, we investigate the impacts of business strategies on earnings management. We examine the relationship between business strategies and earnings management, and find that business strategies have significant effects on earnings management. The cost leadership strategy is positively related to earnings management, indicating that those firms that follow cost leadership strategy tend to have a higher level of earnings management. Our findings indicate that the level of earnings management of cost leaders gets worse when market competition increases. These findings suggest that although market competition may decrease the degree of information asymmetry which is one of the factors causing earnings management, it cannot totally nullify the effects of other factors on earnings management. Considering these findings, regulators should improve and perfect the market so that the market plays its due roles. To prevent earnings management, the government could also consider strengthening its regulatory rules over industry competitions. Product market competition is an important determinant of corporate decisions, and in particular on decisions about a firm's disclosure strategy. The goal of this research was to study the effects of product market competition on the accounting information quality of listed companies in the TSE. This study would enhance our understanding of how firms make their financial disclosure decisions when facing various degrees of the product market competition. 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, when there is a fierce competition both at the firm and at industry level, more disclosure should be attempted. In general, considering the potential strategic choice of the firms in voluntary disclosure, the level of a mandatory disclosure can be tuned more to the less competitive industry where investors are less likely to receive timely financial reporting of high quality.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
218
243
https://jaa.shirazu.ac.ir/article_4979_da19a47496e9dc06b13bcd7b8469fe86.pdf
dx.doi.org/10.22099/jaa.2018.26327.1599
The Relationship between Environmental Management Systems and Financial Performance with Emphasis on Market Factors
Mohammad
Nazaripour
Academic Member
author
Behnam
Nasiri
University of Kurdistan
author
text
article
2018
per
Introduction The relationship between environmental management systems (EMSs) and financial performance has received a high degree of attention in research literature and the results are still contradictory. Most of the findings have shown that environmental performance improves financial performance while others have suggested that the relationship is neutral or even negative. We believe EMSs enhance financial performance due to improved corporate image, quality green products, and reduced internal cost through eco-friendly new technologies. In this study, we suggest that market factors need to be taken into consideration when examining the EMSs-financial performance relationship, because the opportunities and constraints of adopting EMSs are greatly determined by market conditions. We focus on two market contingencies [switching cost (SC) and competitive intensity (CI)] along with variables market turbulence (MT) and firm innovativeness (FI), manifesting the nature of firms' relationships with their customers and competitors respectively. Based on Resource-based view, SC and CI may be the most important market contingencies influencing firms' adoption and implementation of EMSs, and their abilities to profit from such management systems. In this study, we address two important questions: 1) How SC and CI play contingency roles to moderate the relationship between EMSs and financial performance; 2) How SC, CI, MT and FI jointly moderate the relationship between EMSs and financial performance. The purpose of this study is to examine whether and how the performance effects of EMSs depend on SC, CI, MT, FI and/or their combination. Hypotheses Research hypotheses are developed as follows: H1: There is a positive relationship between EMSs and financial performance. H2: SC, CI, MT and FI moderate the relationship between EMSs and financial performance. Methods The data required for the research were gathered through a questionnaire distributed between chief executive officer (CEO), chief financial officer (CFO), marketing and purchasing managers of Semnan’s manufacturing firms. The questionnaire consists of six sections. 218 questionnaires were distributed and finally 150 questionnaires were collected. After collecting the questionnaires, regression analysis was used to test the research hypotheses. Results and Discussion Findings in this study reveal that there is a positive relationship between EMSs and financial performance. After entering the moderator variables, four models were obtained. Regarding the criterion of adjusted R squared, the third model was selected as the optimal model. This means that only the switching cost and competitive intensity have the moderating effects on the relationship between EMSs and financial performance. Finally, the moderating effect of the switching cost is positive (direct) and the moderating effect of the competitive intensity is negative (reverse). Thus, this study underpins the important role of market conditions in influencing the performance effect of EMSs. Market conditions such as SC and CI also influence the relationship between EMSs and financial performance jointly. Overall, this study signals the important role of market conditions and calls for further attention to market conditions as potential moderators when investigating the relationship between EMSs and financial performance. Finally, managers should adapt their firms' degree of EMSs implementation to fit with changing market conditions and to take advantage of the opportunities created by these conditions in order to achieve superior performance.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
244
272
https://jaa.shirazu.ac.ir/article_4980_fc860c5729b04441d981aa7ae886ec5a.pdf
dx.doi.org/10.22099/jaa.2018.24705.1516
Investigating the Relationship between the Dark Triad of Personality and Opportunistic Decision making of Financial managers in Accounting
Farshid
Eimer
Accounting Department, Hakim Jorjani Higher Education Institution, Gorgan, Iran.
author
Mansoor
Garkaz
Accounting Department, Islamic Azad University, Gorgan, Iran
author
text
article
2018
per
Introduction Among the most disadvantaged and annoying social traits introduced by researchers in the psychology literature, three characteristics correlated have attracted the most empirical attention: Machiavellianism, Psychopathy and Narcissism, which led to the introduction of a new personality profile called dark triad of personality. The characters that make up the dark triad traits have some features in common. They show differential correlates but share a malicious social character with behavioral tendencies toward self-esteem, emotional coldness, duality and aggression. Hypotheses This research is an analysis of the influence of the dark triad personality traits in the process of opportunistic decision making in accounting. Optional behavior occurs when managers decide by choosing ways to maximize your wealth against other shareholders. Methods The present research is a semi-experimental, applied and descriptive-correlative research. The statistical population of this study consists of 117 financial managers of companies accepted in Tehran Stock Exchange in 2017 year. The data-gathering tool was a questionnaire. Statistical methods of correlation analysis were used to analyze the date in order to determine the relationship between the dark triad of personality and opportunistic decision making, as well as one-way variance analysis to determine the difference between groups and Bonferroni post hoc test in order to compare the mean of the groups and Tukey post hoc test was used to plot the chart. Results The results of this research show there is a significant correlation between the dark triad elements of the personality. There is also a significant difference between levels (low, moderate and high) of the dark triad personality in opportunistic decision making in accounting. On the other hand, there is a meaningful relationship between the high level of the dark triad personality and opportunistic decision making in accounting. Discussion and Conclusion At the high level of the dark triad personality, the probability of decision-making by managers in accounting will increase further.
Journal of Accounting Advances
2008-9988
10
v.
1
no.
2018
273
303
https://jaa.shirazu.ac.ir/article_4982_5e96027242210ff813db59d4d34b0c8b.pdf
dx.doi.org/10.22099/jaa.2018.26877.1616