Financial Accounting Research
Year:2011 | Volume:3 | Issue:3 (9) |Papers Count:10

Previous studies have shown that companies' managers tend to round-up the first digit of reported earnings. According to these studies, this type of behavior is inspired by the existence of the so-called 199 Toumans phenomenon, where a good with smaller first left digit is perceived as being abnormally lower than the other goods. In the current study, we try to determine whether managers of Iranian listed companies in TSE, also engage in this type of earnings rounding-up behavior?  Is incidence of this type of earnings rounding-up behavior related to specific company characteristics (size, level of debt rate & degree with operating performance)?  In this research we aimed to compare the observed and expected frequencies for the second left digit in reported earnings of Iranian listed companies. In this study, financial statements data of 245 Iranian listed companies in 1387 and financial statements data of the same companies between 1377-1388 was analyzed. To accomplish this research we designed two hypotheses are set testing them by using Benford’s Law as expected frequencies. The results suggest that managers of Iranian listed companies don't tend to round-up reported operating income, in a way that increases the first digit by one, when they are faced with a nine in the second left digit. While testing this behavior by net income of companies offers more relevant result. Furthermore, the large companies and the companies with lesser degree of operating performance have more tendencies to do this behavior in net income.

In this article we study the usefulness of a differentiation strategy of win-lose stocks based on the fundamental factors. In this regard, seven fundamental signals (S-Scores) including three profitability signals, two variability signals and two growth signals are selected based on the effectiveness of winner share purchase and loser stock sale strategies for testing the research hypotheses. We used the financial information of all the companies listed in Tehran stock exchange from 1379 to 1387. In this process, the companies which had no financial reports were excluded from the list. Finally, 2134 year-company's information is used in the research. Results indicate that there exists a significance difference between the simultaneous and the next year return of the higher group (companies with higher score) and lower group (companies with lower score) companies. In order to controls the risk factors after categorizing the companies based on their financial returns, the difference among two groups with higher and lower scores was significant. Furtheremore, the difference between the periodical or time series financial returns in two groups mentioned is proved to be significant.

Managers of companies try to satisfy investors’ expectations through earnings management, and show profitability growth. Regarding the income smoothing motivation two hypotheses exist. According to the first hypothesis, management’s intention is distortion of information and the second hypothesis indicates that management’s intention is transferring and reporting their private information regarding future earnings. This study investigates the impact of income smoothing on stock price informative for firm performance evaluation. The Model that is used for hypothesis testing is Zarowin’s model (2002). Income smoothing is measured as (1) negative correlation between changes in accruals and changes in cash flows, and (2) the variation of net income relative to the variation in cash flows. We use 140 firms listed in Tehran stock exchange during a period of 1382-1386, as research sample. The results of study show, that firms with greater income smoothing have more informative stock prices about the firm’s future profitability and cash flows.

In this article, the effects of disclosure quality on the current and future stock liquidity and cost of capital is investigated. In this regard, the effect of size is controlled. For measuring the disclosure quality, the scores that assigned to each firms by Securities and Exchange Organization is used. For measuring liquidity, shares turnover ratio, trading volume, and the number of traded shares, are used. The findings of investigating 105 firms for a period 1383 to 1387 show that there is a positive significant relationship between size with current and future liquidity, but there isn’t a significant relationship between disclosure quality with current and future stock liquidity. Furthermore, the negative significant relationship between disclosure quality with current and future cost of common equity is confirmed. However, no evidence confirming significant correlation between size and cost of common equity is found.

This paper investigates the relationship between financing constraints and investment–cash flow sensitivities by focusing on cash holdings of firms as the main classification variable to separate firms into financially constrained and unconstrained categories. It is predicted that high cash reserves increase the ability of firms to undertake profitable investment opportunities. in order to comparison of optimal cash reserves model with traditional indices of financial constraint, efficiency of variable such as firm size, dividend ratio and membership in business groups in determining of financial constraints have been examined. This research is a correlation study and is based on the panel data analysis. In this study, about 72 firms that was listed in Tehran Stock Exchange during the period 1378-1387, has been studied (720 company - year). Findings indicate a positive role for cash reserves in reducing investment–cash flow sensitivity of firms. On other hand, we found no certain superiority in the use of cash reserves optimum model compared with traditional criteria of financial constraints.

In this study the effect of “changing the amount of free float” on the “stock returns” in listed companies of Tehran Stock Exchange has been studied. The purpose of this study is to answer this question that whether change in the amount of free float has information contents and can help shareholders to better decisions. A sample of 147 companies were studied for a period of 5 years from 31/06/1383 till 31/06/1388. In this study, In addition to the experimental group, a control group has been used to confirm results of research and the Paired-Samples T Test method has been used to test research hypotheses. The results show that change in the amount of free float, has information content and significant effect on stock returns and decreases the stock returns. The results also suggest that the change in the amount of free float has different effect in different industries.

After Beaver (1968), Ball and Brown (1968) and Fama et al. (1969), event study methodology has been extensively used in finance and accounting research. This method concentrates on measuring abnormal performance of financial assets caused by a special event. Although event study methods are well developed and often used to test financial theories for the US and other well-established stock exchanges, there is some concern regarding efficiency when applied to small stock exchanges dominated by thinly traded stocks (i.e. stocks that do not trade every day). In small stock markets (including Tehran Stock Exchange) there is hardly, continuous daily price data for many shares. This problem is one of the limitations while using standard event study methodology and as a consequence, the results are widely affected by this restriction. Maynes and Rumsey’s (1993) study of thin, moderate, and thickly traded Canadian stocks provides a good framework for conducting event studies on a small stock exchange. In this study, we develop trade to trade method in order to measure abnormal returns. Tehran Stock Exchange trading status is analyzed over the ten-year period1380 to 1389. Finally, the results of applying this method to estimate the market model are compared with the results of lumped return method. We find that explaining power of market model under the trade to trade method for thin and medium trading shares is well better than lumped return.

This study investigates whether taxes affect conservatism in financial reporting and the relevance of the resulting financial accounting data for valuation purposes or not. Research method is cross-sectional regression. Sample consists of 123 firms in Tehran Stock Exchange (TSE) and sample spans the period 2005 – 2009. To test H1, H2 used two adjusted equation based on Terry J. Shevlin. Results indicate that firms with large positive difference between cash flows from operations and taxable income are the most conservative but firms with large negative difference between cash flows from operations and taxable income are not less conservative. In addition, I examine whether the value relevance of financial accounting information is impaired for firms that are influenced by taxation. The evidence in my value relevance tests is generally consistent with the value relevance in financial reporting information not necessarily being decreased when tax rules influence financial reporting incentives rather being increased.

The goal of the present study is to examine Influence of Free Float Stock on Liquidity Indices. Quarterly data of free float stock of 102 firms of 18 industries are collected for a period of 2004 to 2008. And indices of liquidity are trading stock volume, trading market value, trading market frequency, number of buyers and number of trading days. The results of the tests indicate the significant effects of free float stock on all liquidity indices except on logarithm of trading market value. Also findings show that liquidity Indices in companies with at least 20% free float stock are larger than the same means in companies with less than 20% free float stock.  Also results indicate that the mean of number of trading days in a company with at least 20% free float stock is larger than the same mean in a company with less than 20% free float stock. In Tehran stock exchange, there is a negative relationship between free float stock and P/E ratio, but is not statistically significant.