The Role of Financial Instruments and Derivatives Disclosure on the Excess Return and Company Value Based on Iran Accounting Standards

الموضوعات :

Mojtaba Chavoshani ¹ , Babak Jamshidinavid ² , Mehrdad Ghanbari ³ , Afshin Baghfalaki ⁴

1 - Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.|Department of Accounting, Kermanshah Science and Research Branch, Islamic Azad University, Kermanshah, Iran
2 - Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
3 - Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
4 - Department of Economics, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran

تاريخ الإرسال : 05 الأحد , جمادى الثانية, 1440 تاريخ التأكيد : 27 الخميس , شعبان, 1440 تاريخ الإصدار : 17 الجمعة , جمادى الأولى, 1442

الکلمات المفتاحية: Disclosure level, Financial Instruments, Company value, Earning management, Financial derivatives,

ملخص المقالة :

Based on IFRS laws, British companies have started providing their reporting systems according to International Standards Requirements regarding disclosing their financial derivatives since January 2005. In 2013, Iran revised its Accounting Standard No. 15 to include the derivative instruments. The present study aims at investigating the effect of this revision on financial derivatives and instruments, and the effect of earning management on the relationship between the level of financial derivatives and instruments and risk-adjusted discount rates. From generalized least squares regression panel data, it was found that based on the first hypothesis, the companies which disclose their financial instruments based on No. 15 internal standard have a lower risk- adjusted discount rate, implying an increase in profit and a price rise in the markets. The findings also confirmed the second hypothesis, attesting to the effect of earning management on the relation-ship between financial derivatives and instruments disclosure and excess return. Findings of the research third hypothesis represent that there is a direct meaningful relationship between disclosure level of financial instruments and company value. So, it can be concluded that instruments` disclosures and financial derivatives can decrease risk-adjusted discount rate and increase companies` values in terms of standard number 15.

المصادر:

[1] Accounting Standards board, Financial Reporting Standard 13: Derivatives and Other financial Instruments – Disclosures, September1998.

[2] Ahmadi, R., Ariankia N., American Option Pricing of Future Contracts in an Effort to Investigate Trading Strategies; Evidence from North Sea Oil Exchange, Advances in mathematical finance and applications, 2(3), 2017, P.67-77. Doi: 10.22034/amfa.2017.533102 

[3] Board, F. A. S., Conceptual Framework for Financial Reporting, Statement of Financial Accounting Concepts, 2010, No. 8: FASB Norwalk, CT.

[4] Brealey, R., Myers, S., Marcus, A., Fundamentals of Corporate Finance, 8th Ed., New York: McGraw-Hill, 2015.

[5] Chi-Chun, Ch., Chengyee, J, C., Chen, L, C., Wei-Ta, C., Measuring the Consistency of Quantitative and Qualitative Information in Financial Reports: A Design Science Approach, Journal of Emerging Technologies in Accounting, 2018, In-Press. Doi:10.2308/jeta-52312.

[6] Darabi, R., Esfandyari, E., The Relationship between Adjusted Added Value, Earnings before Taxes and Interest, Cash from Operation and Food Industry Companies Listed in Tehran Stock Exchange, Financial Accounting and Auditing Research Journal, 2009, 1(1), P. 76-88 (in Persian).

[7] Dastgir, M., A Comprehensive Review of Earning Management, Journal of Accounting and Auditing Studies, 2012, 2(8), P. 136-186 (in Persian).

[8] Dunne, T.M., Helliar, C.V., The Ludwig Report: implications for corporate governance,

 Corporate Governance, The international Journal of effective Board Performance, 2002, 2(3), P. 26 -31. Doi:10.1108/14720700210440062.

[9] Fanning, K., Agoglia, C., Piercey, M.D., Unintended Consequences of Lowering Disclosure Thresholds, The Accounting Review, 2015, 90(1), P. 301-320. Doi:10.2308/accr-50861.

[10] Dibachi, H., Behzadi, MH, Izadikhah, M., Stochastic Modified MAJ Model for Measuring the Efficiency and Ranking of DMUs, Indian Journal of Science and Technology, 2015, 8, P. 1-7. Doi: 10.17485/ijst/2015/v8iS8/71505

[11] Gonzalez-sanchez, M., Effects of IFRS-13 on the relevance of fair value adjusted by credit risk: Evidence from Europe, Journal of Advances in Accounting, 2017, 40(1), P. 89-97.  Doi:10.2308/jiar-51031

[12] Hasasyegane, Y., Omidi, E., The relationship between the quality of accounting information, the delay of the price response and future return on equity, Empirical studies on financial accounting, 2014, 11(42), P. 31-58 (in Persian).

[13] Heinle, M., Smith, K., Verrecchia, R., Risk-Factor Disclosure and Asset Prices, The Accounting Review, 2018, 93(2), P. 191-208.  Doi:10.2308/accr-51863.

[14] Hoseini, A.,Investigation of Effects of Corporate Reporting Quality, Timeliness and Quantity for Disclosure and Reliability of Financial Reports on Stock Price Delay, Advances in Mathematical Finance and Applications, 2016, 1(1), P.67-83.  Doi:10.22034/amfa.2016.526245.

[15] Hribar, P., Collins, D.W., Errors in estimating accruals: Implications for empirical research, Journal of Accounting research, 2002, 40(1), P. 105-134. ‏ Doi:1475-679X.00041.

[16] Izadikhah, M., Khoshroo, A., Energy management in crop production using a novel fuzzy data envelopment analysis model, RAIRO-Oper. Res., 2018, 52 (2), P. 595-617, Doi: 10.1051/ro/2017082

[17] Huang, J., Su, C., Josef, Nl., Glider, D., Monitoring Mechanisms, Managerial Incentives, Investment Distortion Costs and Derivatives Usage, Journal of the British Accounting Review, 2018, 50(1), P. 93-141.‏  Doi:10.1016/j.bar.2017.11.004

[18] Iran No. 15 Accounting Standard, The committee of Compiling Accounting Standards, 2013 (in Persian).

[19] Iran No. 37 Accounting Standard, The committee of Compiling Accounting Standards, 2018 (in Persian).

[20] Iran No. 36 Accounting Standard, The committee of Compiling Accounting Standards, 2018 (in Persian).

[21] Kasznik, R., On the association between voluntary disclosure and earnings management. Journal of Accounting Research, 1999, 37(1), P. 57-81.

[22] Kazemi-Gavarti, H., Soroushyar, A., Implied Equity Duration and Stock Exchange Return: The Evidence from Tehran Stock Exchange, Financial Engineering and Managing Bonds Journal, 2018, 9(35), P. 243- 258 (in Persian).

[23] Koonce, L., Lipe, M.G., McAnally, M., Judging the Risk of Financial Instruments: Problems and Potential Remedies, The Accounting Review: July 2005, 80(3), P. 871-895.  Doi:10.2308/accr.2005.80.3.871.

[24] Kothari, S.P., Warner, J.B., The Econometrics of event studies, working paper, Tuck School of Business at Dartmouth, Hanover, NH, 2005.  Doi:10.2139/ssrn.608601.

[25] Lehn, K., Poulsen, A., Free Cash Flow and stockholders Gains in going private Transactions, Journal of finance, 1989, 44 (3), P. 771-787.  Doi:10.1111/j.1540-6261.1989.tb04390.x.

[26] Linsmeier, T., Financial Reporting and Financial Crises: The Case for Measuring Financial Instruments at Fair Value in the Financial Statements, Accounting Horizons, 2011, 25(2), P. 409-417.  Doi:10.2308/acch-10024.

[27] Malekian-KaleBasti, E., Fateri, A., Accrual Earning Management during Initial Public Offering and Long Term Stock Return Risks,Accounting Knowledge Journal, 2018, 6(23), P. 55-77 (in Persian).

[28] Mehrani, K., Parvaei, A., Disclosure Quality in Family Firms Listed in Tehran Stock exchange, Journal of Accounting and Auditing Studies, 2014, 21(4), P. 527-540 (in Persian).

[29] Mohammadtalebi, B., Mohammadtalebi M., Jahangiri, M., Eshghiaraghi, M., Investigating the Effect of Internal Rate of Return on Cash Recycling on the Abnormal Returns of Companies Accepted in Tehran Stock Exchange, advances in mathematical finance & applications, 3(3), 2018, P.1-10.Doi:10.22034/amfa.2018.544942.

[30] Moradzandi, A., Tanani, M., Impact of free cash flow and accumulation level on financial flexibility, Financial Accounting and Audit Research, 2015, 7(27), P.57-72. (in Persian)

[31] Namazi M., Gholami, The Effect of Accrual-Based Earning Management on Investment Efficacy among Firms Listed in Tehran Stock exchange, Accounting Knowledge Journal, 2014, 5(17), P. 29-48 (in Persian).

[32] Nekhili, M., Amar, I. F. B., Chtioui, T., Lakhal, F., Free cash flow and earnings management: The moderating role of governance and ownership, Journal of Applied Business Research, 2016, 32(1), P. 255-268.‏ Doi:10.19030/jabr.v32i1.9536

[33] Setayesh, M. H., Taghizadeh, R.,Jokar, M., Investigating the Effects of Accrual Based Earning Management and Real Earning Management on Stock Price Crash Risk of the Listed Companies in the Tehran Stock Exchange, Accounting Knowledge Journal, 2018, 4(1), P. 23-44 (in Persian).

[34] Tahat, Y., Mardini, Gh., Haddad, A., A longitudinal Analysis of Financial Instruments Disclosure in an Emerging Capital market: the case of Qatar, International Journal of accounting and Finance, 2018, 8(1), P. 60-79.  Doi:10.1504/IJAF.2018.090000

[35] Yekini, S.L., Financial instruments disclosure: The role of accounting standards, Thesis, University of Leicester, Leicester, England, 2011. ISNI: 0000 0004 2716 8145