Investor's reaction towards the mental and objective stability of profit components in financially distressed companies

Subject Areas : Financial engineering

kaveh parandin ¹ , babak jamshidinavid ² , Mehrdad Ghanbari ³ , afshin baghfalaki ⁴

1 - Ph.D. Student of Accounting, Faculty of Humanities, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
2 - Department of Accounting, Faculty of Humanities, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran
3 - Department of Accounting, Faculty of Humanities, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran
4 - Department of Economics, Faculty of Humanities, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.

Received: 2019-06-09 Accepted : 2019-07-09 Published : 2019-12-22

Keywords: simultaneous equation system, Investors' reaction, mental stability of components of profit, Objective stability of components of profits, Companies suspected of financial distress, Mishkin test,

Abstract :

The purpose of this study was to study the reaction of investors to the objective and objective suspicion of profit components in suspected financial distress in a        11-year period from 1386 to 1396 with 1320 views in 120 companies accepted in Tehran Stock Exchange. To analyze the data and test the hypotheses, the simulation model of Mishkin (1983) and the multivariate regression model were used using the Eviews software version 10 has been used.The findings of the research indicate that investors have the mental sustainability of cash components and earnings accruals in relation to the objective stability of cash components and earnings accrual, more than actually they value it.Therefore, investors are pricing inappropriately, the profit of companies suspected of financial distress and the capital market is not as efficient as the components of profit information. In other words, companies suspect financial distress, the investors' incorrect responses and inappropriate pricing of them.

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