The Relationship between Financial Reporting Quality and Corporate Performance: Evidence from Iran

Mahmoud Lari Dashtbayaz, Marzieh Hedayatipour, Homa Molavi

Research output: Contribution to journalArticlepeer-review

Abstract

The relationship between financial reporting quality and corporate performance in the imperfect Iranian market is very important for investors, such that one of the main concerns of shareholders is to be informed about corporate performance. On the other hand, information is provided to stakeholders through financial reports and facilitates investment decisions. The aim of this study is to evaluate the effects of financial reporting quality on corporate performance in Iran where this relationship between financial reporting quality criteria and corporate performance has not been investigated yet. In order to test these relationships, 80 listed companies on the Tehran Stock Exchange during the period 2006 - 2014 were studied and analyzed. In this study, three separate methods (contingent income, accrual items, and accruals quality of working capital) and a composite method used to evaluate the quality of financial reporting and in order to calculate the corporate performance, we used the economic and market value added. The results show that the improvement of reporting quality increases the economic value added according to Dechow and Dichev (2002) models. No relationship found between different criteria of financial reporting quality and the market value added.The aim of this study is to evaluate the effects of financial reporting quality oncorporate performance in Iran.To test hypotheses, data of all listed companies on theTehran Stock Exchange were analyzed during a period from 2008-2016. In this study, three separate methods (contingent income, accrual items, accruals quality of working capital) used to evaluate the quality of financial reporting and in order to calculate corporate performance, we used the economic and market value added. The results show that the improvement of reporting quality increases theeconomic value added according to Dechow and Dichev (2002) models. No relationship found between different criteria of financial reporting quality and the market value added. Each company's performance is affected by various factors. The studyintends to mention that the performance of listed companies in the stock market depends heavily on its financial reports.
Original languageEnglish
Pages (from-to)13-30
Number of pages18
JournalIranian Journal of Accounting, Auditing and Finance
Volume2
Issue number1
Publication statusPublished - 1 May 2018

Keywords

  • Financial reporting quality
  • Corporate performance
  • Tehran Stock Exchange

Fingerprint

Dive into the research topics of 'The Relationship between Financial Reporting Quality and Corporate Performance: Evidence from Iran'. Together they form a unique fingerprint.

Cite this