Tehran Stock Exchange Research Articles

How do Islamic banks manage earnings? Application of various measurement models in the Iranian Islamic banking system

PurposeThis study aims to identify and compare the measurement models of earnings management (EM) appropriate to the Iranian Islamic banking system. The importance of reported profit figures has motivated business executives, who also perform financial reporting, to manipulate these figures. These measures are referred to as “earnings management,” which negatively influence the quality of reported earnings and financial statements' reliability.Design/methodology/approachIn this study, four methods, namely, Jones (1991), modified Jones (Dechow et al., 1995), Kasznik (1999) and Kothari et al. (2005), were used to measure the EM index in 25 Iranian Islamic banks (IBs) registered with the Tehran Stock Exchange and/or the Central Bank of Iran. The study covered the period 2005–2020. Following the aforementioned methods, this research implemented templates that were repeatedly tested in subsequent studies using accruals to discover EM.FindingsThe results show that the Kasznik (1999) model is the preferred and compatible model with the Iranian Islamic banking system's accrual behaviour due to the consistency of the measurement coefficients with theoretical and previous research findings. Therefore, total accruals, including discretionary accruals and non-discretionary accruals, have the most correspondence with (1) property, machinery and equipment; (2) the change in cash flow from operating activities; and (3) the difference of change in revenue (ΔREV) and change in net receivable accounts (ΔREC).Originality/valueThis is the first investigation in the Iranian Islamic banking system. The research contributes to the Iranian Islamic banking system literature on the implements of EM, which could be appealed to in the context of developing countries like Iran. Finally, this study highlights the different EM capabilities in Islamic banking systems similar to the Iranian banking arrangement.

Investigating the effect of organizational culture dimensions on financial performance: In case study of pharmaceutical companies listed on the tehran stock exchange

Organizational culture is the force that have people to act and has a strong and penetrating effect on all components of the organization, hence the recognition of organizational culture to create an innovative organization and benefit from the creativity of the staff is important. The purpose of this research is to determine the effect of organizational culture on financial performance. The method used in the current study was surveyed, and we used Cameron & Quinn questionnaire (2006), to measure the organizational culture variable as an independent variable, and from the functional data of the accepted pharmaceutical companies in Tehran Stock Exchange in 2014, to measure the financial performance variable as a dependent variable. The software used in this research included Excel and SPSS, so that in Excel, necessary calculations, and in SPSS the data analysis were done. Also, Regression has been used to investigate the direct effect of the research variables. Based on the standard coefficient and the significance level obtained, there is not any significant relationship between variables. The results of statistical analysis indicate that there is no significant relationship between studied cultures and financial performance.

An Applied Study: Investigate the relationship of cash flows, capital expenditure and the ratio of shares issued according to the price coefficient (Case Study: Companies accepted in Tehran Stock Exchange)

The interests of an investor in an enterprise include: Future earnings, future cash flows and paying future cash dividends, Investing in these interests is demanded by investors and awareness of both the profit and future cash flows draws more attention. The purpose of this study is to investigate the effect of cash flows, capital expenditures and stocks on the price coefficient. This research is an applied research in terms of purpose it also falls into the descriptive-correlational research group in terms of inferring research hypotheses, combined regression models and panel data were used to test the hypotheses, multivariate linear regression test (year-company) was used to test the hypotheses. It is a library and analytical-scientific study based on panel data analysis (panel data). After collecting the required information from the companies involved, the research hypotheses were analyzed using correlation and regression analysis and data analysis panel method, initially, preliminary calculations were performed in Excel software and the data was prepared for analysis, then 10 E views software was used to perform the final analysis. In this study, financial information of 101 companies listed in Tehran Stock Exchange during the period 1391 to 1396 (660 companies - year) was reviewed. Based on the analysis carried out to confirm the first hypothesis of the study, we concluded that: There is a significant and direct relationship between cash flows and capital expenditures of companies with respect to the price coefficient of each share. We also concluded that, in support of the second research hypothesis: There is a significant and direct relationship between the ratio of issued stocks and the accumulated cash flows of companies according to the price coefficient.

The Relationship Between CEO Power, Audit Fees and Corporate Growth Opportunities

One of the most important goals of companies is to create value and increase the wealth of shareholders in the long run and the increase in wealth will be achieved only as a result of the desired performance of the company and the desired performance will be achieved with proper management of the company. In this regard, company managers and especially the CEO play an important role in running the company. Therefore, various decisions in the company are influenced by the power and influence of the CEO. Also, the impact of the CEO's power and influence on the company's outcomes depends on the comparative advantage of benefits and costs. Therefore, in this study, the relationship between CEO power, audit fees and corporate growth opportunities has been investigated. The statistical population of the research is the companies listed on the Tehran Stock Exchange and the research period is from 2011 to 2020. To test the research hypotheses, 77 companies were selected by systematic elimination method. To test the hypotheses, panel data were used and the relationship between variables was estimated using multivariate regression. The results show that there is a negative (positive) and significant relationship between CEO power (audit fee) and corporate growth opportunities. Also, CEO power has a significant moderating effect on the relationship between audit fees and corporate growth opportunities. The research findings could cover the research gap in this area and be useful for managers, investors, and capital market lawmakers in decision making.

Auditor characteristics and the financial reporting quality: the moderating role of the client business strategy

PurposeThis study examines whether and how a client's business strategy can affect the relationship between auditor characteristics and financial reporting quality.Design/methodology/approachIn this study, auditor industry specialization and tenure were used as proxies for auditor characteristics. The client business strategy was measured using the resource allocation index method. Finally, discretionary accruals are used to assess financial reporting quality. This study includes 1,450 firm-year observations and 145 companies listed on the Tehran Stock Exchange (TSE) over a ten-year period from 2011 to 2020. The research hypotheses were analyzed using a multivariate regression model and panel data.FindingsThe results show that auditor industry specialization increases financial reporting quality. This relationship improves when the client's business strategy deviates from the industry–normal strategy. The research findings state that auditor tenure has a positive association with financial reporting quality, and this relationship is strengthened when the company's business strategy deviates from the normal industry strategy.Practical implicationsThe findings of this study provide important evidence for investors, firm management, and auditing firms. Investors must consider the auditor characteristics when selecting companies listed on the TSE. Managers of Iranian companies are advised to consider the auditor's characteristics when choosing an audit firm to increase financial reporting quality. Audit firms should evaluate their business strategies in audit planning to increase the quality of financial reporting.Originality/valueTo the best of the authors’ knowledge, this is the first empirical study to examine the relationship between auditor characteristics and the financial reporting quality in the emerging capital market by considering the clients' business strategy.

Reconsideration of behavioral biases in financial markets: comparison of the S&P500 index and TEPIX index of Tehran Stock Exchange

Reconsideration of behavioral biases in financial markets: comparison of the S&P500 index and TEPIX index of Tehran Stock Exchange

Development of Optimal Stock Portfolio Selection Model in the Tehran Stock Exchange by Employing Markowitz Mean-Semivariance Model

In an increasingly complex financial market, selecting the optimal stock portfolio has become a subject of intense debate. This study aims to develop a model for optimal stock portfolio selection. We apply Markowitz's mean-semivariance approach to determine the downside risk of portfolios, which reflects investors' intuitive perception of risk. In the first stage, the combination of the Analytic Hierarchy Process (AHP) and Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) with interval data is employed to identify and rank good quality stocks according to the recommended criteria by experts. After selecting qualified stocks, in the second phase, we create portfolios, and the weight invested in each stock is determined. Then, three portfolios are created for three groups of risk-averse, neutral to risk, and risk-taker investors. The mean-semivariance optimization model is used in this phase. The proposed approach in the paper is implemented in a real case study of the Tehran stock exchange (TSE). Three portfolios for three groups of investors were evaluated and compared to the market performance using sharp criteria. All three portfolios outperformed the market portfolio both in terms of risk and return. The proposed model of this study can be utilized as a decision support tool when forming an optimal stock portfolio by considering both experts’ opinions on stock evaluation and investor risk preferences simultaneously.

Input/Output Variables Selection in Data Envelopment Analysis: A Shannon Entropy Approach

The purpose of this study is to provide an efficient method for the selection of input–output indicators in the data envelopment analysis (DEA) approach, in order to improve the discriminatory power of the DEA method in the evaluation process and performance analysis of homogeneous decision-making units (DMUs) in the presence of negative values and data. For this purpose, the Shannon entropy technique is used as one of the most important methods for determining the weight of indicators. Moreover, due to the presence of negative data in some indicators, the range directional measure (RDM) model is used as the basic model of the research. Finally, to demonstrate the applicability of the proposed approach, the food and beverage industry has been selected from the Tehran stock exchange (TSE) as a case study, and data related to 15 stocks have been extracted from this industry. The numerical and experimental results indicate the efficacy of the hybrid data envelopment analysis–Shannon entropy (DEASE) approach to evaluate stocks under negative data. Furthermore, the discriminatory power of the proposed DEASE approach is greater than that of a classical DEA model.

Investigating the value level of pharmaceutical companies in Tehran Stock Exchange

The main purpose of this research is to examine the relationship between human resources productivity and the value level of companies admitted to the stock market of Tehran Stock Exchange. The methods of library study and review of documents and the content of the materials, as well as the preparation of interviews were used to collect information. By reviewing the subject literature and interviewing managers and experts of some pharmaceutical companies, the components affecting the productivity of human resources have been determined and by brainstorming, the three components of the motivational system, work commitment and job enrichment have been determined in priority. The value level of pharmaceutical company’s stocks, is determined by the ratio of price to profitability, book and accounting value of companies and their market value. With statistical analysis and hypothesis testing, the significant relationship between the productivity components of human resources and the value levels of pharmaceutical companies have been confirmed. The results of the analysis show that unlike other companies accepted in the stock market of Tehran Stock Exchange, where the components of industry, politics and economy are effective in their success and value, for pharmaceutical companies, human resources and especially their level of expertise play a major role in the level of value. Also, high work commitment despite low motivational systems is one of the other obvious results of this research about these companies.

The impact of business strategy and annual report readability on financial reporting quality

Purpose This study aims to mainly explore the impact of business strategy and annual reports readability on financial reporting quality in Tehran Stock Exchange (TSE). Design/methodology/approach The sample comprised 160 companies listed in TSE from 2014 to 2020. Five proxies (including two accounting-based attributes and two market-based attributes) were used to measure financial reporting quality. In this study, cost leadership and differentiation strategies were considered and Fog index was used to measure the annual report readability. Findings The results showed that in all methods of calculating financial reporting quality, cost leadership strategy, differentiation strategy and annual report readability had a positive and significant impact on financial reporting quality. Also, only at the high level of the differentiation strategy, the annual reports readability influenced financial reporting quality. In addition, at all levels of high and low annual report readability, cost leadership strategy affected financial reporting quality, but only in companies with a high annual report readability, the differentiation strategy affected financial reporting quality. Only for companies with a low readability, the annual report readability affected financial reporting quality. Originality/value To the best of the authors’ knowledge, no study had examined the impact of business strategy and annual report readability on financial reporting quality at the core of the present study. Furthermore, little was known about the strategic choices made in Iran. So, the research filled this gap in TSE. This study provided insights for policymakers to enhance the readability and reduce the complexity of annual reports.

Institutional Ownership and Investment Efficiency: Evidence from Iran

Investment efficiency shows how well a company invests its assets. Although institutional shareholders play undeniable roles in companies, it is not clear whether they are able to monitor managers and make investment decisions or not. This study gives answers to stakeholders, addresses concerns about the effect of the owners on investment efficiency, and aims to add to the literature on emerging markets by investigating the relationship in Iran, a different environment from developed ones. Based on monitoring power, the shareholders are divided into two types: active and passive ones. Investment problems are classified into two types: over- and under-investment problems. The sample consists of 101 firms listed on the Tehran Stock Exchange between 2010 and 2016. Some regression models are used. The results illustrated that institutional owners have a positive effect on investment efficiency and decrease both over- and under-investment problems and so, the efficient monitoring school is approved. Additionally, active ones are positively correlated with investment efficiency and decrease both investment inefficiency problems. Institutional ownership is the cause of investment efficiency, not the reverse. Based on findings, in emerging markets like Iran’s market, investors are recommended to give notice to the level of active ownership in firms; ownership structure is a good sign of efficiency.

Investor sentiment and mean-variance relationship in Tehran Stock Exchange

رابطه مثبت بین ریسک و بازده زیربنای تئوری‌های کلاسیک مالی است اما پژوهش‌های صورت‌گرفته حاکی از رابطه متفاوت و متناقض بین این دو متغیر است. نظریه‌های مالی رفتاری، نتایج متفاوت به‌دست‌آمده‌ را به احساسات سرمایه‌گذاران در بازار سهام نسبت می‌دهند. در این پژوهش تأثیر احساسات سرمایه‌گذاران حقیقی با شاخص BSI بر رابطه بین ریسک و بازده در 103 شرکت بورس اوراق بهادار تهران بررسی گردیده است. همچنین این رابطه در بین سهام رشدی و ارزشی؛ شرکت‌های با ارزش بازاری بالا و پایین و شرکت‌های دارای قیمت سهام بالا و قیمت سهام ارزان، نیز بررسی شده‌است‌. واریانس شرطی سهم‌ها با استفاده از مدل‌های گارچ استخراج گردیدند و فرضیه‌های پژوهش نیز با روش داده‌های ترکیبی آزمون شدند. نتایج نشان می‌دهد که احساسات تأثیری بر رابطه بین ریسک و بازده در کل نمونه، در شرکت‌های بزرگ، سهام رشدی و شرکت‌های با سهام دارای قیمت بالا ندارد اما احساسات این رابطه را در سهام ارزشی، شرکت‌های کوچک و شرکت‌های با قیمت پایین، تشدید می‌کند. همچنین احساسات منجر به تضعیف رابطه مثبت بین ریسک و بازده در شرکت‌های با ارزش بازاری بالا می‌شود. بر اساس یافته‌های پژوهش، سرمایه‌گذاران باید هنگام ایجاد پرتفوی خود بر اساس واریانس، علاوه بر در نظر گرفتن احساسات سرمایه‌گذاران، به ویژگی‌‌های سهم از لحاظ ارزشی و رشدی بودن، ارزش بازاری شرکت و نیز قیمت سهام شرکت توجه نمایند.

The Interactive Effect of Ownership Structure on the Relationship between Annual Board Report Readability and Stock Price Crash Risk

This study investigates the interactive effect of ownership structure on the relationship between annual board report readability and stock price crash risk in companies listed on the Tehran Stock Exchange (TSE). The negative skewness model was used to measure the crash risk of stock prices and the Fog index was used for determining the readability of the board of directors’ report. The ownership structure is examined in institutional ownership, significant managerial ownership, and family ownership. The data of companies listed on the TSE from 2013 to 2019 have been used. The statistical method of this research is multiple regressions and, to test the research hypotheses, the data panel model and the ordinary least squares method have been employed. Overall, this study provides new evidence to explain the reporting quality and the crash risk of stock prices from the lenses of the agency theory. It further investigates the interactive effect of ownership structure on the relationship between annual board report readability and stock price crash risk. The results show a significant correlation between the readability of the board of directors’ report and the crash risk of stock prices. Furthermore, the relationship between the readability of the board report and stock price crash risk is not affected by the ownership structure, including institutional ownership, significant managerial ownership, and family ownership. It can be inferred that an ownership structure, which includes institutional shareholders, significant shareholders, and family ownership, increases the supervision of managers and their reports, so they cannot keep adverse information from being released. This will ultimately improve the readability of their reports and reduce the risk of stock price crashes.

Agency costs and auditor choice: moderating role of board’s expertise and internal control

PurposeThis study aims to examine the effects of agency cost on auditor choice. This paper also deals with the moderating role of the board’s financial expertise (Bfe) and the status of the internal control (Intecon) system on the relationship between agency cost and auditor selection.Design/methodology/approachThis study’s sample consists of 1,040 firm-year observations of Iranian nonfinancial companies listed on the Tehran Stock Exchange from 2012 to 2019. The information required for this research is mainly extracted from Comprehensive Database of All Listed Companies (in Iran Stock Exchange). Data from 130 companies were obtained during the research period. This study used logistic regression to test the hypotheses.FindingsThe findings indicate that companies with higher agency costs choose the auditor from lower classes. As the proportion of financial expert members on the board increases, the intensity of this relationship will be reduced. Companies with higher agency costs choose the auditor from the lower classes, but the higher the ratio of financial expert board members, the more these companies will choose high-quality auditors. However, findings showed that the status of the Intecon system has no moderating effect on the relationship between agency costs and auditor selection.Originality/valueThe results of this study can expand the existing literature on the relationship between auditor selection and agency costs and the factors affecting this relationship, especially the Bfe and Intecon. This research has significant suggestions for regulators, stakeholders, shareholders and analysts in emerging economies that may encounter similar contextual implications.

Effects of Efficiency and Financial Risk (Credit Risk, Operational Risk, Liquidity Risk and Financial Wealth) on the Performance of Insurance Companies Listed on the Tehran Stock Exchange: A Case Study in Iran

Effects of Efficiency and Financial Risk (Credit Risk, Operational Risk, Liquidity Risk and Financial Wealth) on the Performance of Insurance Companies Listed on the Tehran Stock Exchange: A Case Study in Iran

Study of Systemic risk in the banking sector of Tehran Stock Exchange: Graph theory approach and ARMA-gjrGARCH-DCC

Study of Systemic risk in the banking sector of Tehran Stock Exchange: Graph theory approach and ARMA-gjrGARCH-DCC

THE EFFECT OF CORPORATE GOVERNANCE ON THE FINANCIAL PERFORMANCE OF COMPANIES LISTED ON THE TEHRAN STOCK EXCHANGE

The present study investigated the effect of corporate governance on the financial performance of companies listed on the Tehran Stock Exchange. In this study, the duality of CEO duties and financial performance were considered as corporate governance mechanisms. Indicators like return on assets, return on equity and net operating profit after tax have been used to measure financial performance. The studied period was 2013 to 2017 and samples were member companies of Tehran Stock Exchange. The findings revealed that corporate governance and financial performance of companies listed on the Tehran Stock Exchange had a favorable significant association. With the ROE index, there was a significant positive association between board accountability and corporate performance. With the TQ index, there was a positive significant association between board accountability and company performance, and with the ROE index, there was a positive significant relationship between transparency level and firm performance. There was also a substantial positive link between the amount of transparency and business performance as measured by the TQ index, as well as a significant positive relationship between the audit committee and company success as measured by the ROE index.

Investigating the Relationship between Information Asymmetry and Political Communication with Investment Efficiency in Tehran Stock Exchange

The primary purpose of this study is to investigate the relationship between Political Communication and Information Asymmetry with the efficiency of investment in companies listed on the Tehran Stock Exchange. To achieve the above goal, two hypotheses were formulated. To test research hypotheses, a sample consisting of 109 companies listed on the Tehran Stock Exchange in the period 2014 to 2019 was selected. And a panel regression model based on composite data was used which has independent and dependent variables. The results of this study show that Political Communication has a negative and significant impact on Investment Efficiency, In contrast, Information Asymmetry has a positive and significant impact on Investment Efficiency, and this means that with increasing information asymmetry, investment efficiency increases. Therefore, political communications prefer corporate resources to pursue profitable investment options, thus altering corporate investment behaviors and reducing corporate investment efficiency. The results also show that Information asymmetry prevents investors from commenting on investment opportunities, thus allowing local managers to take advantage of profitable investment options.

Wavelet based Filtered historical simulation in different time horizons in Tehran Stock Exchange

Wavelet based Filtered historical simulation in different time horizons in Tehran Stock Exchange

Investigating the nonlinear relationship between debt structure and real and accrual-based earnings management

Earning is one of the most important items of financial statements. Sometimes managers manipulate and distort earning reports to maximize their own benefits, reach a certain profitability level, or achieve a certain corporate objective. Firms with a low level of debt tend to have few or no restrictive clauses in their debt contracts, which allow them to operate with less concern about breaching these contracts and give less incentive to managers to engage in earning management reports through accrual manipulation. However, when firms accumulate large amounts of debt, the relationship between debt and accrual-based earnings management tends to get reversed. In firms with large debts, managers are incentivized to report good earnings as they are under pressure to avoid the penalties of violating the restrictive clauses in their debt contracts. In the absence of scientific and empirical evidence regarding this issue, the present study examined the nonlinear relationship between debt structure and real and accrual-based earnings management. For this purpose, the data pertaining to a sample of 130 firms listed on the Tehran stock exchange from 2014 to 2019 were collected and analyzed. The results of multivariate regression analysis showed a nonlinear relationship between debt structure and accrual-based earnings management. A non-linear relationship was also found between current debt structure and real earnings management. However, the results could not confirm the presence of a non-linear relationship between total debt structure and real earnings management