Presenting a Model for the Role of Disclosure Quality in the Relationship between Innovation and Financial Performance

Subject Areas : Business Strategy

Sayed Davoud Hoseini Rad ¹ , Mostafa Ghasemi ² , Abdolreza Mohseni ³

1 - Phd. Student, Department of Accounting, Bushehr branch, Islamic Azad University, Bushehr, Iran.
2 - Assistant Prof., Department of Accounting, Bushehr branch, Islamic Azad University, Bushehr, Iran.
3 - Assistant Prof., Department of Accounting, Bushehr branch, Islamic Azad University, Bushehr, Iran.

Received: 2022-09-25 Accepted : 2023-01-01 Published : 2023-01-01

Keywords: innovation, earnings per share, Disclosure Quality,

Abstract :

This study aims to present a model for the role of disclosure quality in the relationship between innovation and financial performance. The present study seeks to determine whether disclosure quality improve the relationship between innovation and financial performance or not? This study is a correlation study. Data is analyzed using structural equation modeling. The statistical population comprised of companies listed on the Tehran Stock Exchange. Y exerting the systematic elimination 140 companies were selected from 2015 to 2022. Result of the first hypothesis showed a significant and positive relationship between Innovation criteria and financial performance indices. This means that innovation improves financial performance. The results of the second hypothesis showed a significant and positive relationship between innovation criteria and disclosure quality indices. This means that innovation enhances the quality of disclosure. The third hypothesis's results showed a significant and positive relationship between financial performance criteria and disclosure quality indices. This means that financial performance improves disclosure quality. The results of the fourth hypothesis showed that disclosure quality indicators have a moderating role between Innovation criteria and financial performance indicators. This means that disclosure quality causes innovation to improve financial performance in the Tehran Stock Exchange and provide these companies with better disclosure quality.

References:

Abbasi, P., Radfar, R. (2022). Modeling Open R&D Ecosystem Via System Dynamics Approach A Case Study: Nanotechnology. Journal of System Management, 8(1), 19-36. doi: 10.30495/jsm.2022.1936709.1504. (In persian).

Adler, P., & Chen, C. (2011). Combining creativity & control: Understing individual motivation in large scale collaborative creativity. Accounting, Organizations & Society, 36 (2), 63-85. https://doi.org/10.1016/j.aos.2011.02.002.

Ahmadi, Y., Bani Mahd, B., Taliban, gh., & Pourzamani, Z. (2021). The effect of earnings management on the relationship between earnings forecast error & accounting conservatism. Management Accounting, 13, 201-217. (In persian)

Amabile, T. M. (1998). How to kill creativity. Harvard Business Review on breakthrough thinking, 1-29. doi: 10.4236/ce.2012.326110

Antoncic, B., & Prodan, I. (2008). Alliances, corporate technological entrepreneurship and firm performance: Testing a model on manufacturing firms. Technovation, 28(5), 257-265. https://doi.org/10.1016/j.technovation.2007.07.005.

Bazrafshan, A., Hejazi, R., & Rahmani, A. (2016). Meta-analysis (meta-analysis) of the independence of the audit committee & the quality of financial reporting. Management Accounting, 8: 101-117. 10.30495/IJFMA.2023.20525 . (In persian)

Behnampour, M., Ezadi Nia, N., & Saffari, B. (2020). Analysis of the role of accruals in measuring accounting performance & quality based on the Nikolov model. Accounting & Auditing Reviews, 26, 327-347. https://doi.org/10.22108/far.2021.122595.1627. (In persian)

Bisbe, J., & Otley, D. (2004). The effects of the interactive use of management control systems on product innovation. Accounting, organizations and society, 29(8), 709-737. https://doi.org/10.1016/j.aos.2003.10.010

Cheng, P., Man, P., & Yi, C. H. (2013). The impact of product market competition on earnings quality. Accounting & finance, 53(1), 137-162. https://doi.org/10.1111/j.1467-629X.2011.00457.x

Covin, J. G., & Miles, M. P. (1999). Corporate entrepreneurship and the pursuit of competitive advantage. Entrepreneurship theory and practice, 23(3), 47-63. https://doi.org/10.1177/104225879902300304

 Covin, J. G., & Slevin, D. P. (1986). The development and testing of an organizational-level entrepreneurship scale. Frontiers of entrepreneurship research, 1(3). 628-639. https://doi.org/10.1177/104225879101600102

Covin, J. G., Green, K. M., & Slevin, D. P. (2006). Strategic process effects on the entrepreneurial orientation–sales growth rate relationship. Entrepreneurship theory and practice, 30(1), 57-81. https://doi.org/10.1111/j.1540-6520.2006.00110.x

Dada, O., & Watson, A. (2013). Innovation & the Franchise System: Organizational Antecedents & Performance Outcomes. European Journal of Marketing, 47(5/6), p.1. DOI:10.1108/03090561311306877

Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The accounting review, 77(s-1), 35-59. DOI:10.2308/ACCR.2002.77.S-1.35

Demski, J. S. (2008). Managerial uses of accounting information 2. New York: Springer.

Dermina, D., Shirdel, G., & Iranban, S. (2021). Illustration of the Position of Knowledge-Based Management in Iranian Organizations. Journal of System Management, 7(3), 89-110. doi: 10.30495/jsm.2021.1927569.1461. (In persian).

Fanian, M. (2018). Study of the relationship between economic & social responsibility & FP with emphasis on the role of Innovation in food production companies in Isfahan. Master Thesis. Azad University, Najafabad Branch. (In persian)

Ferreira, D., & Gustavo, M. (2014). Incentives to innovate & the decision to go public or private. Review of Financial Studies, 27(2), 256–300. https://doi.org/10.1093/rfs/hhs070

Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). The market pricing of accruals quality. Journal of accounting and economics, 39(2), 295-327. https://doi.org/10.1016/j.jacceco.2004.06.003

Frank, H., Kessler, A., & Fink, M. (2010). Entrepreneurial orientation and business performance replication study. Schmalenbach business review, 62(2), 175-198. http://www.vhb.de/sbr/pdfarchive.html 

Freeman, R. N., Ohlson, J. A., & Penman, S. H. (1982). Book rate-of-return and prediction of earnings changes: An empirical investigation. Journal of accounting research, 639-653. doi.org/10.2307/2490890

Galbreath, J., Lucianetti, L., Thomas, B. and Tisch, D. (2020). Entrepreneurial orientation and firm performance in Italian firms: The moderating role of competitive strategy. International Journal of Entrepreneurial Behavior & Research, 26(4), 629-646. https://doi.org/10.1108/IJEBR-07-2019-0457

Gallemore, J., & Labro, E. (2015). The importance of the internal information environment for tax avoidance. Journal of Accounting and Economics, 60(1), 149-167. https://doi.org/10.1016/j.jacceco.2014.09.005.

González-Blanco, J., Coca-Pérez, J. L., & Guisado-González, M. (2018). The contribution of technological and non-technological innovation to environmental performance. An analysis with a complementary approach. Sustainability, 10(11), 4014. doi.org/10.3390/su10114014

Gupta, V. K., & Batra, S. (2016). Entrepreneurial orientation and firm performance in Indian SMEs: Universal and contingency perspectives. International Small Business Journal, 34(5), 660-682. https://doi.org/10.1177/0266242615577708.

Haji Ebrahimi, M., & Esknar, H. (2020). Investigating the effect of management overconfidence on risk-taking & firm performance. Empirical Accounting Research, 6: 339-362. 10.22051/jera.2018.17046.1770 (In persian).

Hosseini, M., & Salar, J. (2012). Study of the effect of market orientation & Innovation on the performance of stock exchange food companies. New marketing research. 6, 107-119. 20.1001.1.22517081.1397.7.4.9.4 . (In persian)

Huang K., Lao B., & McPhee., G. (2019). Internal information quality & patent related Innovation. Journal of Business Finance & Accounting. 47(3-4), 489-518. https://doi.org/10.1016/j.irfa.2022.102357

Hult, G., Snow, C. & Kaemir, D. (2003). The role of entrpreneurship in building cultural competitiveness in different organization types. Journal of Management, 29(3), 401-426. https://doi.org/10.1016/S0149-2063_03_00017-5.

Jafarionya, S., Noor A., Reza. M., & Razmavar, T. (2020). Study of the effect of innovation & dynamic capabilities on firm performance with the role of dual power mediation. Quarterly Journal of Innovation Management in Defense Organizations, School of Management, Shahid Sattari University, 3, 119-142. 10.22034/QJIMDO.2019.89198 (In persian).

Jiang, X., Yang, Y., Pei, Y. L., & Wang, G. (2016). Entrepreneurial orientation, strategic alliances, and firm performance: Inside the black box. Long Range Planning, 49(1), 103-116. doi.org/10.1016/j.lrp.2014.09.003

Kamel., i, N (2018). Effect of Innovation on Firm Performance & Failure: A Longitudinal Analysis. Durham theses, Durham University. Available at Durham, ETheses Online: https://doi.org/10.1080/02681102.2019.1573717

Kang J., K. Kim, & Henderson, W. (2002). Economic Value Added (EVA): A FP Measure. Journal of Accounting & Finance Research, 10(1), 48-60. DOI:10.1016/j.ijpe.2011.05.014

Keh, H. T., Nguyen, T. T. M., & Ng, H. P. (2007). The effects of entrepreneurial orientation and marketing information on the performance of SMEs. Journal of business venturing, 22(4), 592-611. https://doi.org/10.1016/j.jbusvent.2006.05.003

Keshavarz, S., Vaziri Sereshk, M., Abdolbaghi, A., Arman, M. (2022). Trading Strategies Based on Trading Systems: Evidence from the Performance of Technical Indicators. Journal of System Management, 8(1), 37-50. doi: 10.30495/jsm.2022.1937933.1509. (In persian)

Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of management Review, 21(1), 135-172. doi.org/10.5465/amr.1996.9602161568

 Mahdavi, Gh. H., & Rezaei, Gh. (2012). Investigating the Effects of Financial Reporting Quality on Profit Sharing Policy. Quarterly Journal of Financial Accounting & Auditing Research, 5(17), 1- 32. 20.1001.1.23830379.1392.5.17.1.6 (In persian).

Mahmoudabadi, H & Gh. Rezaei (2012). Study of the effects of earnings management on the quality of financial reporting in companies listed on the Tehran Stock Exchange. The first regional conference on new approaches to accounting & auditing. Islamic Azad University, 113-128. 10.22099/JAA.2014.1878 (In persian).

Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management science, 29(7), 770-791. https://doi.org/10.1287/mnsc.29.7.770

Namazi, M., & F. Moghimi (2018). The effect of Innovation & the adjusting role of social responsibility on the FP of companies in various industries. Quarterly Journal of Accounting & Auditing Reviews, 25 (2), pp. 289-310. 10.22059/ACCTGREV.2018.255023.1007870 (In persian).

Noroush, I., & Hosseini, S. A. (2009). Investigating the Relationship between the Quality of Disclosure, Reliability, Timeliness, & Profit Management. Accounting & Auditing Reviews, 134, 117. doi: 20.1001.1.26458020.1388.16.2.15.2 (In persian) 

Parker, R. J., & Kyj, L. (2006). Vertical information sharing in the budgeting process. Accounting, Organizations and Society, 31(1), 27-45.
doi:10.1016/j.aos.2004.07.005

Rezaei, R., Safarkhani, M, Imani, A., & Khalilzad, M. (2017). Study of the Impact of New Product Development & International Marketing Strategies on Export Performance (Case Study: Manufacturing & Export Companies of West Azerbaijan Province. Journal of Marketing Management, 11(31), 44. (In persian)

Sadeghi Far, M., Kaffashpoor, A., Naami, A. (2022). Proposing a Customer Experience Management Model Based on the Grounded Theory Approach in Aviation Industry (Case study: Taban Airline). Journal of System Management, 8(2), 33-44. doi: 10.30495/jsm.2022.1945579.1576

Saharkhiz Roshandel, F., haghighat monfared, J., & Adab, H. (2022). A Model of Evaluating the Agile of Health care Institute using a Stable Balanced Score Card (Case study: selected Hospitals in Guilan province). Journal of System Management, 8(1), 73-88. doi: 10.30495/jsm.2022.1938932.1514

Seru, A. (2014). Firm boundaries matter: Evidence from conglomerates and R&D activity. Journal of Financial Economics, 111(2), 381-405. https://doi.org/10.1016/j.jfineco.2013.11.001

Shan, P., Song, M., & Ju, X. (2016). Entrepreneurial orientation and performance: Is innovation speed a missing link? Journal of Business Research, 69(2), 683-690. https://doi.org/10.1016/j.jbusres.2015.08.032

Sirafi Nafis, M. H., Taheri Kia, F., & Khoshtinat, B. (2022). The Impact of Organizational Entrepreneurship on Improving Competitive Advantage with Mediating Role of Innovation in Start-up Digital Industries. Journal of System Management, (2), -. doi: 10.30495/jsm.2022.1966437.1683

Sotoudeh Manesh, Z, Bahram B., & Gholami, K. (2019). Study of the Relationship between Profit Management Disclosure & Disclosure with Real FP in My Company Listed on the Tehran Stock Exchange. the first National Management Conference with Emphasis on Supporting Iranian Goods & Services, Abadeh, Islamic Azad University, Abadeh Branch, https://doi.org/10.22054/qjma.2018.9430 (In persian).

Setayesh, M. H., Kazem Nejad, M., & Zolfaghari, M. (2012). Study of the effect of disclosure quality on stock liquidity & capital cost of companies listed on the Tehran Stock Exchange. Journal of Financial Accounting Research, 9: 55- 74. 10.22059/ACCTGREV.2012.73235 (In persian).

Stein, J. C. (1997). Internal capital markets and the competition for corporate resources. The journal of finance, 52(1), 111-133. doi.org/10.1111/j.1540-6261.1997.tb03810.x

Tabaristani, S. A., Abdolreza M., & Ghasemi, M. (2016). Study of the effect of company characteristics on the quality of disclosure in companies listed on the Tehran Stock Exchange. First International Conference on Accounting, Economics & Banking, Tehran, National Development Conference Center of Iran (In persian).

Zhang, Y., & Zhang, X. (2012). The effect of entrepreneurial orientation on business performance: A role of network capabilities in China. Journal of Chinese Entrepreneurship, 4(2), 132-142. https://doi.org/10.1108/17561391211242744