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Article
Publication date: 8 January 2018

Mahdi Salehi, Masomeh Tagribi and Shayan Farhangdoust

The purpose of this paper is to examine the effect of earnings quality (as a proxy for financial reporting quality) of companies listed on the Tehran Stock Exchange (TSE) and the…

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Abstract

Purpose

The purpose of this paper is to examine the effect of earnings quality (as a proxy for financial reporting quality) of companies listed on the Tehran Stock Exchange (TSE) and the quality of their financial information disclosure on stock returns.

Design/methodology/approach

The authors test the hypotheses by conducting panel data analysis on a sample of 1,680 firm-year observations from companies listed on the TSE during 2009-2014. The authors also conduct the variance inflation factor and unit root tests to control for the severity of multicollinearity in their ordinary least squares regression analysis and whether the time series variables are non-stationary and possess a unit root.

Findings

Using Francis et al. (2005) and modified Jones (1991) models as measures for earnings quality, the results are indicative of a significant and positive relationship between firms’ earnings quality and their stock returns. However, the research findings suggest that earnings management as well as disclosure quality (DQ) is not significantly associated with firms’ stock return.

Research limitations/implications

Although the authors controlled for some of the factors affecting stock returns, there are still some other factors such as the operating environment, institutional setting and/or information uncertainty that could influence stock returns, and accordingly, the authors were not able to exclude their possibility and get the most robust results. Moreover, there are several models proposed in different studies for measuring earnings quality which have led to mixed results particularly without a general consensus on what a good model is, and whether earnings quality is a priced risk factor.

Originality/value

Taken as a whole, the paper could provide new insights into the determinants of stock returns which has rarely been considered by prior finance literature. Furthermore, the unique institutional context of the paper could contribute substantially to the literature on the relationship between financial reporting and DQ and stock returns.

Details

International Journal of Productivity and Performance Management, vol. 67 no. 1
Type: Research Article
ISSN: 1741-0401

Keywords

Article
Publication date: 13 November 2017

Mahdi Salehi, Afsaneh Lotfi and Shayan Farhangdoust

The purpose of this paper is to examine the effect of financial distress costs, corporate growth rate, and flexibility on the interaction between ownership structure and corporate…

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Abstract

Purpose

The purpose of this paper is to examine the effect of financial distress costs, corporate growth rate, and flexibility on the interaction between ownership structure and corporate debt policy.

Design/methodology/approach

The authors test the hypotheses by employing simultaneous equations system methodology with two-stage least squares regression and panel data technics on a sample of 786 listed companies on the Tehran Stock Exchange during 2010-2015.

Findings

The results indicate that there is a positive and significant relationship between corporate debt level and managerial ownership in the Iranian listed companies. The authors also find no convincing evidence that either the firm’s growth or financial health could influence or moderate this interrelationship.

Research limitations/implications

The implications drawn from this study are constrained by two primary limitations. First, the present study is conducted in an Iranian setting; therefore, the data utilized for the study only contain companies listed on the Tehran Stock Exchange. The utilization of listed companies on the Tehran Stock exchange is likely to affect the generalizability of the study in a national context. Second, the authors were unable to extend the sample time period due to some major deficiencies in the Tehran Stock Exchange library and its supplementary software.

Social implications

Since the fundamental institutional assumptions underpinning the western and even East Asia capital structure models are not valid in the institutional environment of Iran, the findings could provide substantial implications for our understanding of capital structures as well as debt policy literature.

Originality/value

This is an innovative research in terms of the mutual relationship between debt and ownership structure and the use of equations system to measure the interaction between them.

Details

Journal of Management Development, vol. 36 no. 10
Type: Research Article
ISSN: 0262-1711

Keywords

Article
Publication date: 30 April 2020

Shayan Farhangdoust, Mahdi Salehi and Homa Molavi

The purpose of the present paper is to examine the trade-off relationship between managerial ownership and corporate debts and whether this relationship is moderated by ownership…

Abstract

Purpose

The purpose of the present paper is to examine the trade-off relationship between managerial ownership and corporate debts and whether this relationship is moderated by ownership structure and corporate tax rates, particularly in a transition and emerging market whose unique institutional characteristics considerably differ from those prevailing both in the West and East markets.

Design/methodology/approach

This research is semi-empirical in terms of method and practical in terms of purpose. The authors test their hypotheses by using simultaneous equations system methodology with two- and three-stages least squares regression (2SLS and 3SLS) and panel data technics on a sample of 952 listed companies on the Tehran Stock Exchange during 2011-2018.

Findings

The findings indicate that, contrary to the current line of research, there is no trade-off relationship between managerial ownership and debt concerning the reduction of agency costs. Likewise, the study finds no convincing evidence that either the controlling shareholder or the corporate tax rate could influence or moderate this interrelationship. The conjecture lies in the fact that the fundamental environmental variations between the Tehran Stock Exchange and the institutional assumptions underpinning the Western models have led to the formation of such unexpected results.

Research limitations/implications

The implications drawn from this study are constrained by two primary limitations. First, the present study is conducted in an Iranian setting; therefore, the data used for the study only contain companies listed on the Tehran Stock Exchange. The utilization of listed companies on the Tehran Stock Exchange is likely to affect the generalizability of the study in an international context. Second, in this study, we were unable to extend the sample time period because of some major deficiencies in the Tehran Stock Exchange library and its supplementary software. The usage of an extended time period could have provided more generalizable results. However, extended time period, per se, may impair the validity of the results as well.

Originality/value

Because the fundamental institutional assumptions underpinning the Western and even East Asia capital structure models are not valid in the institutional environment of Iran, the findings of this study could provide substantial implications for the understanding of agency costs and capital structure literature. These significant institutional and ownership differences are the factors affecting firms’ leverage and capital choice decisions. Indeed, this study has laid some groundwork upon which a more detailed evaluation of the Iranian firms’ capital structure could be based. In addition, the examination of such relations may provide the ground for sound decision-making by various interested users of financial and accounting information.

Article
Publication date: 7 February 2018

Mahdi Salehi, Maryam Timachi and Shayan Farhangdoust

The purpose of this paper is to establish a linkage between two rarely researched areas, i.e. earnings quality (EQ) and access to external and internal debt financing…

Abstract

Purpose

The purpose of this paper is to establish a linkage between two rarely researched areas, i.e. earnings quality (EQ) and access to external and internal debt financing. Specifically, the authors aim to examine whether the quality of a firm’s reported earnings is significantly associated with its access to both private and bank debt financing.

Design/methodology/approach

The authors test the hypotheses by employing panel data analysis for a sample of 108 companies listed on the Tehran Stock Exchange (TSE) during 2006-2015. The tests were conducted by using R econometric software.

Findings

After controlling for some firm-specific factors and consistent with the primary expectations, the results reveal a significant and positive relationship between EQ and managerial access to external (bank) debt financing. In addition, the findings indicate that EQ is negatively associated with internal debt financing which is measured as the changes in firm retained earnings.

Research limitations/implications

Although the authors cautiously conducted the present study, there are some limitations that merit further consideration. First, the authors collected the data manually from 14 categories of industries in the TSE and, accordingly, an aggregate analysis across multiple categories of industries might have missed industry-specific and unique issues. Second, the authors used a narrow conceptualization of accruals quality which merely assesses a firm’s EQ. The measures can be enhanced by including more actionable proxies. Third, since the data on debt financing were collected from two different sources, this might have caused common method variance in the results procedurally.

Originality/value

Since the fundamental institutional assumptions underpinning the Western and even East Asia debt contracting and EQ models are not valid in the institutional environment of Iran, the findings could provide substantial implications for the understanding of both debt financing and the quality of earnings. These significant institutional and ownership differences are the factors affecting firms’ leverage and capital choice decisions. Indeed, the study has laid some groundwork upon which a more detailed evaluation of the Iranian firms’ financial structure could be based.

Details

Journal of Economic and Administrative Sciences, vol. 34 no. 1
Type: Research Article
ISSN: 2054-6238

Keywords

Article
Publication date: 30 March 2020

Mahdi Salehi, Fereshteh Seyyed and Shayan Farhangdoust

Given the negative consequences of job burnout for both individual auditors and audit firms, the present study aims to examine the effect of auditors' personal characteristics…

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Abstract

Purpose

Given the negative consequences of job burnout for both individual auditors and audit firms, the present study aims to examine the effect of auditors' personal characteristics, working life quality and psychological well-being on auditors' job burnout.

Design/methodology/approach

We chose 240 auditors (junior, senior, manager and partner) who work at 53 audit and public accounting firms in Mashhad during 2015–2016 as our sample. The respondents were randomly selected and the data were gathered through the distribution of questionnaires of Walton’s (1973) quality of working, Ryff’s (1995) psychological well-being and Maslach and Jackson’s (1984) job burnout. We also employ structural equation modeling (SEM) along with statistical path analysis to test our hypotheses by using R statistical software.

Findings

Consistent with our expectations and prior literature, our findings suggest that auditors' job burnout is significantly and positively influenced by auditors' personal traits, quality of working life and psychological well-being.

Originality/value

The present study is quite remarkable and unique in that it focuses on a specific audit market where there are significant differences in socio-economic, political and cultural factors with those of Western or European developed markets. The results provided in this paper could be fruitful for auditors, regulators and policymakers.

Details

International Journal of Organization Theory & Behavior, vol. 23 no. 3
Type: Research Article
ISSN: 1093-4537

Keywords

Article
Publication date: 12 September 2018

Mahmoud Mousavi Shiri, Mahdi Salehi, Fatemeh Abbasi and Shayan Farhangdoust

In the process of reporting accounting information, the auditor’s objective is to detect possible misstatements and errors in accounting information. Audit evidence aids auditors…

Abstract

Purpose

In the process of reporting accounting information, the auditor’s objective is to detect possible misstatements and errors in accounting information. Audit evidence aids auditors in providing reasonable assurance about the quality of financial reporting. Studying the quality of family firms’ financial reporting is of higher importance relative to non-family firms due to lower risk of accounting manipulation. Therefore, the purpose of this paper is to examine the relationship between family ownership structure and financial reporting quality from an auditing perspective.

Design/methodology/approach

To analyze the research hypotheses, the authors use a sample data consisted of 221 companies listed on the Tehran Stock Exchange (including 52 family and 169 non-family firms) over a five-year span from 2011 to 2015.

Findings

Using multivariate regression analysis of panel data, our results indicate that audit risk in family firms is lower than their counterparts. Likewise, the findings are indicative of lower audit fees paid by family firms as compared to non-family ones. The authors also find that auditors put more effort in family firms and thus audit effort is more significant for these kinds of firms.

Originality/value

The study focuses on family ownership and financial reporting quality in a developing country like Iran and the results of the study may be beneficial to other developing nations, as Iran stock market possesses some unique features which are not normally prevailing in other equity markets, even in the Middle East.

Details

Journal of Family Business Management, vol. 8 no. 3
Type: Research Article
ISSN: 2043-6238

Keywords

Open Access
Article
Publication date: 11 June 2020

Shayan Farhangdoust and Lida Sayadi

The present study seeks to shed further light on the effectiveness of Basu (1997) and Khan and Watts' (2009) differential timeliness metrics in detecting predictable differences…

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Abstract

Purpose

The present study seeks to shed further light on the effectiveness of Basu (1997) and Khan and Watts' (2009) differential timeliness metrics in detecting predictable differences in conservatism following corrections of restated earnings.

Design/methodology/approach

Using cross-sectional and time-series analyses for companies listed on the Tehran Stock Exchange during 2009–2013, the results indicate lower conservatism for restating firms as compared to their counterparts during prerestatement period.

Findings

Using cross-sectional and time-series analyses for companies listed on the Tehran Stock Exchange during 2009–2013, the results indicate lower conservatism for restating firms as compared to their counterparts during prerestatement period. In contrast, our findings are indicative of higher conservatism among these restating firms during the years of restatements. Moreover, the time-series approach captures a higher conservatism for the restating firms during restatement years than prerestatement periods. Overall, these results provide insight into the usefulness of the metrics used in the restatement setting.

Originality/value

Similar to recent papers, the present study seeks to shed further light on the ability of Basu-based coupled with Khan–Watts-based measures of conservatism to detect situations in which companies' earnings are known to be significantly restated.

Details

Asian Journal of Accounting Research, vol. 5 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Content available

Abstract

Details

Journal of Applied Accounting Research, vol. 23 no. 4
Type: Research Article
ISSN: 0967-5426

Article
Publication date: 19 September 2023

Hamada Elsaid Elmaasrawy, Omar Ikbal Tawfik and Khaled Hussainey

This study aims to examine the impacts of board chairman characteristics on the decision to finance with debts.

Abstract

Purpose

This study aims to examine the impacts of board chairman characteristics on the decision to finance with debts.

Design/methodology/approach

Based on historical data from 173 active nonfinancial firms listed on Gulf Cooperation Council (GCC) Stock Exchange Markets during 2012–2019, this research uses ordinary least squares (OLS) and dynamic system-generalized methods of moments to test its hypotheses. The final dataset comprises 1,384 firm-year observations from 10 major nonfinancial industry classifications.

Findings

Results indicate a negative impact of board chairman ownership on the decision to finance with retained earnings (RE). Negative effects of the chairman and chief executive officer (CEO) from the same family on the decision to finance with RE, whereas positive effects of the chairman and CEO from the same family on the decision to finance with debts are observed. In addition, a negative effect of the chairman from a royal family on the decision to invest with debts is found.

Research limitations/implications

Many board chairmen characteristics, such as age, gender, experience, education level, periodic change and ethnicity, are unaddressed. Financial decisions (FDs) are also limited to two decisions (internal financing with RE and external financing with debts).

Practical implications

Findings of this study provide an improved understanding of the role of chairman characteristics in FDs in GCC. Investors and lenders dealing with companies in GCC markets benefit from the authors' results because of the effects of chairman characteristics on FDs when making investment decisions in company stocks.

Originality/value

The study clarifies how each of the three board chairman characteristics (i.e. chairman ownership, chairman and CEO from the same family and the chairman from the royal family) affects FDs, especially the decisions to finance with debts and RE.

Details

The Journal of Risk Finance, vol. 24 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

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