THE IRANIAN ACCOUNTING AND AUDITING REVIEW
Year:2006 | Volume:12 | Issue:42|Papers Count:10

This study investigates the value-relevance of earnings and book values over time for securities listed on the in Tehran Stock Exchange (TSE). Our work is motivated by recent researches about value-relevance of earnings and book values in equity valuation including Ohlson [12], and Collins, Maydew and Weiss [4]. Three set of finding are reported. First, the variable earnings have almost explanatory power in equity valuation. Second, combined value-relevance of earnings and book values is through of reported earnings. Finally, incremental value-relevance of reported earnings is higher than book value and book value has very little explanatory power in equity valuation.      

In spite of unanimity on the necessity to evaluate the information provided by management by competent and independent persons, different discussions have been always stipulated in respect of the effects and influences of auditing report on the process of decision making by users. This research, on the basis of plan and test of four hypotheses, reviews of Provisions deficit pointed out in auditing report as well as the effect of the disclosure of its amount on the decisions of investors and experts. Statistical society of this research is limited to the companies admitted in Tehran Stock Exchange and Negotiable Papers Organization for the first and second hypotheses; but, for the third and fourth include hypotheses, three groups of experts of stock exchange organization of Tehran they are the expert of correspondent companies and investors in the companies admitted in stock-exchange organization shall. The findings of this research indicate that changing the number of the clauses of auditing report on the deficit of the company's Provisions does not have any significant influence on the price of its shares. However, the changes in the amount of Provisions deficit pointed out in auditing report will have significant effect on the shares price. Although, a significant difference between the average of shares price proposed by the groups aware and unaware of tax Provisions deficit was observed in the group of the experts and correspondents of Tehran stock exchange and negotiable papers organization, no significant difference is visible between the average of shares price proposed by each of the groups aware and unaware of this deficit in the group of investors.

Positive theory assumes that maximizing wealth is the most important factor in investing decision. On the other hand, in agency theory, there isn't information asymmetry between Investment Company as an agent and their stockholders as a principal. In other word principal asses information for decision making, while he don't have all of information that agent has. According to this theory, principal is risk averse, it means he assumed risk if expect return increase. The cost of Investment Company is assumed by their stockholders if them earn additional return, other wise agency cost will be loaded to their stockholders. This article shows result of part of research that investigates the performance the investment company that boursian part of their portfolios at least 50%. Jensen model was used for measuring performance. The result demonstrates 26.9 percent average gross excess return. however it is 1.1 percent of this return was assigned to operating expenses that seems not be important.Net excess return was 25.8 that was important that represents their positive performance in compare with overall market. However the results of this research didn't show hot hand in their performance using Jensen and Treynor measuring models for performance ranking. Therefore it seems investment companies can discharge their agency responsibilities in respect of their boursian part of portfolio in the research period well.      

The earning management literature attempts to understand why managers manipulate earnings, how they do so and the consequences of this treatment. These questions are the focus on a significant area of inquiry within financial reporting research. Operating cash flow is difficult to manage, unless firms intentionally front load or defer the recognition of cash accompanying revenue or expense. Therefore, operating cash flow should be a good measurement of the firm's operating performance. So, it is expected, a bad performer has a strong incentive to employ income-increasing accounting strategies, while a good performer in general has relatively weak incentives to employ income-increasing accounting strategies. Therefore, it is expected that operating cash flow and discretionary accruals (as surrogate to earning management) represent a significant adverse relationship. So, relationship between these variables is examined in the period of 1381-1382 (estimation period) for TSE firms. For estimating of discretionary accrual Modified Jones Model is used and event period for this purpose is 1377-1382. The results show that TSE firms do earning management when operating performance is poor and they tend to choose income increasing accounting strategies.      

This paper seeks to study, by industry type, the effect of capital structure on the profitability of the firms accepted in Tehran security exchange. To do this, we studied the firms whose financial statements (balances and inane statement) and required data were available for the period (1375-1379). A total number of 108 fi9rms from different industries were selected. Then we surveyed the data…. The average of liability asset ratio and the return on equity ratio and the average of liability - asset ratio and the return on assets ratio for the five year period on a centralized and annual basis. Simple regression and correlation coefficient were used to test the hypotheses, and their significance was determined by using T and Z statistics. The results suggest that: a) In general, there exists a positive relationship between capital structure and profitability, but this relationship is statistically poor. b) The relationship between capital structure and profitability is also depended on the type of industry. c) The relationship between capital structure and profitability in different industries depends on the definition of profitability.      

Some researchers have classified institutional investors into two groups. According to them, the first group is investors that focus on short-term earnings and the second group include professional investors, whose relative advantage is in gathering and analysis of more data regarding future earnings which is not reflected in reported income. Thus, as the number of this type of investors increases in the capital market, the share prices will reflect more information regarding future returns and therefore information asymmetry logically should decrease. The purpose of this study is to provide evidence on the role of the second type of institutional investors in decreasing information asymmetry in Tehran stock exchange. To conduct the empirical tests we obtained two distinct samples of invested companies. One with low and the other with high degree of institutional ownership. The result of our study showed that the latter companies reported more information related to future earnings than the former ones. Therefore, more information asymmetry is observed in the invested companies with low degree of first group of institutional investors. The intervening variables such as size, book to market value ratio and financial leverage were under control in our study.