Journal of Accounting Advances
Year:2011 | Volume:3 | Issue:1 (60/3)|Papers Count:8

Introduction: The capital asset pricing model (CAPM) of Sharpe (1964) and Lintner (1965) was the most widely recognized explanation of stock prices and expected returns. It gives a prediction of risk of an asset or a portfolio and its expected return which thereby helps in evaluating potential returns of investments.Fama and French (1992) found that the cross section of average stock returns for the period 1963-1990 for US stocks is not fully explained by the CAPM beta and that stock risks are multidimensional. Two of these dimensions of risk, they suggest, are proxied by size and the ratio of book value of common equity to its market value (BE/ME). Fama and French (1993) came up with a model for explaining stock returns using three factors: market, book to market, and size. This model was supportive of Banz (1981) who claimed that ‘size effect’ was present for more than 40 years and that the CAPM was misspecified ....

Introduction: Liquidity is an important issue for securities traded in financial markets. A certain level of liquidity is necessary for securities to be traded in the quantites required in a timely fashion whithout any price discount. The goal of this paper is to examine the relationship between different liquidity proxies and stocks’ trading characteristics for listed companies in Tehran Stock Exchange. In this paper, five different liquidity proxies are introduced. The proxies are stock turnover, the illiquidity ratio, zero return measure, proportional bid-ask spread and turnover adjusted number of zero daily volumes. Stocks’ trading characteristics include stock price, trading volume, return volatility, absolute return, and Beedles’ thin trading measure ….

Introduction: Based on information approach, earnings concept indicates output of economic activities, however, as an essential criterion it is suspicious. Actual accounting has given considerable right to managers in determining of the earnings during different periods. In fact, based on this accounting system type, the managers have mass control on time recognizing some of the revenue and expense items. This subject causes an event named earnings management. Earnings management is the process of taking wise steps within the limits of GAAP to achieve the expected earnings.Optional acts of the managers by earnings management may provide the background to hide real value of assets and financial position, and create negative outcome for stockholders, employees, society, managers’ and their joy security ....

Introduction: In accordance with modern financing literature, agency conflicts are considered as one of the determining factors of the capital structure of companies. In agency theory, increased use of liabilities in the capital structure of the company is introduced as one of the ways to reduce agency costs, as the increased use of liabilities in the capital structure of the company leads to decrease in conflicts of interest between managers and shareholders by reducing the need for financing through owner’s equity.  On the other hand, the results of several studies suggest that agency conflicts are considered as one of the determining factors of capital structure of the companies. Moreover, financing decisions, as one of the strategic decisions in managing companies, are influenced by the mechanism of corporate governance ....

Introduction: Both accountants and financial economists and financial management have devoted considerable attention to the impact of governance structures. The accounting literature documents that these factors have a substantial impact on earnings management, while the finance literature shows that they likewise affect financial performance. Consistent with past research, our paper is similar to Black (2001) and Garay and Gonzalez (2008), who tested the relation between corporate governance and firm value in Russia and Venezuela as transition economies characterized by weak investor protection. The evidence we show here adds to the growing literature worldwide that indicates that firms can differentiate themselves by adopting better corporate governance practices and policies. That is, even in a weak investor protection environment, firms can increase their market value by adopting good corporate governance measures ....

Introduction: On the basis of theoretical principles of financial reporting, the primary goal of financial reporting is to assist the investors to make economic decisions. Economic decisions are related to optimal allocation of the resources. One of the most important decisions is related to investment in stocks which is itself considered as a function of the value of the investment seeking company. In its conceptual statement of financial accounting No. 1, the Financial Accounting Standard Board (FASB) announced the presentation of useful information to the investors, creditors and other potential and present users for assessing the amounts, timing and uncertainty of cash flow as one of the goals of financial reporting. In spite of the knowledge of FASB about the importance of the amounts contained in financial reports, it has presented little guidance on the manner of using these amounts in its conceptual statement. Therefore, in order to fill out this gap, valuation models based on accounting have provided guidance in this area (Barth et al, 2005: 312). Accounting valuation models by information in financial statements evaluate a company ....

Introduction: One of the basic problems of applied finance is the optimal selection of stocks by conflicting objective of maximizing future return and minimizing investment risk. The first systematic treatment of this dilemma is the mean variance approach proposed by Markowitz. Markowitz combined the optimization and probability theory to solve the dilemma. In Markowitz’s mean variance model, the security returns are assumed to be random variables, and the investors are postulated to establish equilibrium between the conflicted objectives, which the investment risk and return are respectively quantified by mean and variance of portfolio of security ....