Financial Accounting Research
Year:2010 | Volume:2 | Issue:3 (5)|Papers Count:13

The purpose of this study is to test the effect of economic factors on accounting quality. Economic factors include economic growth and economic freedom. Accounting quality is expressed by earnings opacity. Three dimensions of earnings opacity are earnings aggressiveness, loss avoidance, and earnings smoothing. To measure earnings opacity, manufacturing listed firmۥs total accruals, earnings, and operating cash flow for ten years is used. Economic growth is measured as the annual growth of GDP per capita. For, Economic Freedom variable we use, the 2009 Annual Report of Fraser Institute. To test the economics determinants of earnings opacity, we have regressed economic factors against opacity measures. The result show earnings opacity is positively related to economic growth. But, level of economic freedom is not significantly related to earnings opacity.

This paper examines the relation between accruals quality and the cost of common stock. Cost of common stock as part of a company’s cost of capital is common stockholders’ expected return. As common stockholders take investment risk, they expect an appropriate return. Information risk, besides investment risk, may affect cost of capital. Accruals quality, as one of the most important indicators of information risk, has a major role on determination of cost of common stocks. Review of the relation between accruals quality as well as its discretionary and nondiscretionary components and cost of common stocks, using information of 107 listed companies over the years 2000 to 2008, indicates a significant relation between accruals quality and cost of common stocks. There is a stronger relation between a nondiscretionary component of accruals and cost of common stocks than that between a discretionary component and cost of common stocks.

Studies investigating the market overreaction argue that investors overreaction to past financial performance drive stocks with high historical financial measures above their fundamental values. On the other hand price of stocks with poor past financial performance are pushed below their fundamental value. Subsequently, when investors realize that their previous expectations have not corrected, stock price of these firms revert to their fundamental values. The current study investigates overreaction of stockholders in the Tehran stock exchange (TSE). We examine the impact of reaction investors to change the accruals. Time frame of present study is nine years that is a period of 1999 to 2007. Testing method in this study is portfolio and regression test. The results indicate that investors in the Tehran stock exchange over react to the accruals and there is accrual anomaly in the market, but the accruals persistence is not a factor to mislead the investors.

The main goal of this paper is to investigate life cycle effect on the value relevance of risk measures and performance measures. To test the research hypotheses, first, sample firms were classified into three life-cycle stages (Growth, Mature and Decline). Then, using regression models and Vuong's Z-statistic the hypotheses were tested. In this study, the financial data of 74 firms which are listed in Tehran’s Stock Exchange (TSE) for the period of 2001 to 2007 (518 firm-years) are tested. The results show that in different life cycle stages the value relevance of risk measures and performance measures and the incremental explanatory power of risk measures have significant difference. Moreover, the results of Vuong's Z-statistic show that in growth stage the incremental explanatory power of risk measures is significantly higher than other stages, and in mature stage the opposite is true.

The main purpose of this research is to test the relationship between corporate governance and taxable profit. For this purpose the relations between some important factors of the corporate governance including the percentage of the outside member of the board of directors, CEO duality role and institutional investors with other factors such as declared and final tax assessment are studied. The data used in this study is based on information published by Tehran Stock Exchange (TSE) and also the tax document of 82 companies listed in TSE. The hypotheses of the research are tested using two sample T-test, one sample T-test and regression analysis. The results of the research show that corporate governance had no effect on declared or final tax assessment, although for the two groups of companies with and without corporate governance structure, the difference between declared and final tax assessment was significant.

The goal of this study is to appraise the ability of earning, operating cash flows and accruals in predicting future operating cash flows with respect to special time lags. The research period is from 2004 to 2009, and our sample include companies listed in Tehran Stock Exchange. The regression results of the research hypotheses show that there is a significant relationship between future operating cash flows and earning, and three years lags show the highest relationship in relation to other lags and current year. Also, results reveal that, there is a significant relationship between future operating cash flows and, current and past operating cash flows, and current year shows the highest relationship in relation to all the lags. Furthermore, The results indicate that there is a significant relationship between future operating cash flows and accruals, and two years lags show the highest relationship in relation to other time lags and current year.

Regarding the increasing importance of liquidity, getting knowledge about the factors which can have effects on it, can be helpful to make it improved. This study offers evidences about the role of the accrual management in the stock liquidity. In this research, we adopted the modified Jones model to measure accrual management. We investigated the influence of accrual management on five liquidity measures, after observing the effects of control variables. Considering sampling limitations, we tested 75 corporations, from 1383 to 1387 (355 observations). We utilized cross-sectional multivariable regression to test our research hypotheses. The results indicate that accrual management has a significant negative effect on stock liquidity. Higher earning management causes higher information asymmetry and transaction costs, so the willingness of uninformed traders decreases and the stock liquidity falls.