Financial Accounting Research
Year:2012 | Volume:4 | Issue:1 (11)|Papers Count:8

Earnings as a most important product of accounting information systems should have adequate quality. Earnings quality has a wide meaning and many implications. In accounting literature the lack of earnings management and timeliness effects of bad news (conditional conservatism) are some aspects of causing high quality of earnings. By considering earnings management and conditional conservatism in failed firms this study seeks to analyze the earnings quality and compare it with earnings quality of sound companies. This survey conducted on the companies listed on the Tehran stock Exchange (TSE) and in the period of 1380 to 1388. The results of this research show that failed firms manage earnings upwards in three years prior to failure. This manipulation was investigated by two methods of earnings management (accounting earnings management & real activity earnings management) and shows that failed firms manage their earnings more than sound firms by real activity, but sound firms do earning management through manipulating accruals. Also this research by employing the Ball & Shivakumar model investigates the situation of conditional conservatism in failed and sound firms. It is revealed that the sound firms have more conditional conservative earnings than failed firms, and as a result sound firms have more earnings quality.

This study examines the claim that adjusted profit based variables are superior measures than earning per share (EPS) on the basis of stock return. In this paper, four hypotheses are set to test the research question and a sample of companies listed in Tehran Stock Exchange (TSE) for the time period of 2002-2008 is used. For hypotheses testing, single variable regression model presented. In this study free cash flow, cash flow return on investment, economic value added and earnings per share are independent variables. Also stock return is considered as a depended variable. To estimate the regression model panel data regression is used. The results show that performance evaluation indexes are not significantly related with stock returns. Also the results show that EPS, as a traditional performance evaluation measure, is yet superior to others measure. Collectively, results are ambiguous and do not provide strong evidence that show superiority of the three above mentioned measures to EPS for evaluating of firm performance.

Financial facilities capacity is the amount of debt a firm can repay in a timely manner (from available means or resources) without jeopardizing its financial viability. Tehran stock exchange (TSE) listed companies have standard financial structure due to listing requirement that they are committed to follow. But some of them have paid penalty for delay in reimbursement. It is the signal that they passed their debt capacity. In this paper, TSE listed companies without reimbursement delay penalty have been used to be modeled. The main objective of this survey is to investigate the factors that have impact on the company’s debt capacity. The sample of this study consists of 128 companies listed in Tehran Stock Exchange for a period of 2004 – 2009. Data structure is unbalanced panel data form.  For testing the hypotheses, Generalized Least Squares (GLS) and Ordinary Least Squares (OLS) models were applied for the sampled companies in 16 different industries. Finally this study presented models that use financial variables to determine debt capacity for the companies under study.

Stocks Valuation needs information related to the level of company’s profitability. Investors and managers should pay attention to historical information in decision making regarding stock valuation and forecasting the future earnings. In this paper, the theory of earnings components superiority was compared with the total earnings in explaining the future earnings. It was also evaluated whether or not managers and investors consider the earnings components in their decisions. Furthermore, the way of earnings components weighted by investors and managers was tested. For these purposes, the data of 80 companies listed in Tehran Stock Exchange (480 years-firms) for a period of 1382-87, was collected. The results revealed that persistency of different components of earnings is not the same and components of earnings are better explains future earnings compared to the total earning. The earnings components are also taken into account by the managers and investors in their decision-making process. Furthermore, managers and investors underestimate the cash components of earnings persistency in forecasting the future earnings.

By separating management from ownership and after the advent of the genesis of agency theory, performance measurement is propounded as one of the major subjects in accounting. The aim of this study is to investigate the role of the modern and the traditional liquidity indexes groups in appraising financial performance. For this purpose, 15 hypotheses were set to test the significance of the relationship between liquidity indexes and the financial performance of the sampled companies. The statistical method used to test the proposed hypotheses was the regression method using “panel data”. The sample is restricted to 74 companies using their data for a period of 2000-2010. The results of the study indicated that all of the hypotheses were supported except the hypothesis related to Tobin-Q. Generally, the results of hypotheses tests showed that in corporates’ financial performance evaluation, modern liquidity indexes represent the most accurate illustration to financial information user.

Based on life cycle theory, firms have various characteristics in various stages of their life cycle. Since discretionary accruals are counted as a criterion for income smoothing, the main question in the present study is whether the firm life cycle has any effect on the amount at use of discretionary accruals. Using Anthony and Ramesh's (1992) and Black's (1998) method of classifying, the sample companies using indices for sales growth, change in capital expenditure and the firm age, growing, mature and declining stages were classified. Then using modified Jones model discretionary accruals were estimated. In the last stage, the hypotheses of the study were tested using pooled regression and Generalized Least Squares (GLS) method. The sample of this study is consisted of non-financial firms listed in Tehran Stock Exchange during the years 1384 to 1388. The findings showed that the rate of use of discretionary accruals is different at various stages of life cycle, so that, the rate of use of discretionary accruals at the grow stage is more compared with the mature and declining stages. This rate of use is less at the mature stage than the declining stage.

This paper explores the effect of earnings management on the earnings persistence of companies listed in Tehran Stock Exchange. We employ financial data of 95 firms listed in Tehran Stock Exchange during 1378 to 1383. Panel data methodology is used in order to test the hypotheses of this research. This paper contains significant and consistent results. The results of testing hypotheses for each of the six years and the pooled sample show that earnings persistence in the firms that does earning management is higher than other firms. The results also demonstrated that there is a positive relationship between earnings smoothing and earning per share persistence.