The Effect of Internal Quality Controlon the Relationship between Financial ReportingQuality and Mass Behavior in Investors

Subject Areas : Ethics and accounting

Zeinab Rezaei ¹ , Ali Tamoradi ²

1 - Assistant Professor, Department of Accounting, Shushtar Branch, Islamic Azad University, Shushtar, Iran
2 - Instructor, Department of Accounting, Ramhormoz Branch, Payam Noor University, Ramhormoz, Iran

Received: 2022-08-13 Accepted : 2022-10-09 Published : 2022-06-22

Keywords: stock exchange, Financial Reporting Quality, Mass Behavior, Investors, Internal Quality Control (IQC),

Abstract :

The purpose of the present study is to review the effect of internal quality control (IQC) on the relationship between financial reporting quality and mass behavior of the accepted corporations' investors in Tehran Stock Exchange. The method of study was descriptive-analytic which used the statistical software of EViews 10 for data analysis. In this research, 150 corporations (1050 years of participation) were chosen for the research hypothesis testing from 2013 to 2020. For the research hypothesis testing, multi-vitiate regression models with panel data were used. The results showed that financial reporting quality has a significant effect on the mass behavior of the accepted corporations' investors in Tehran Stock Exchange. Moreover, IQC increases the negative correlation between financial reporting quality and mass behavior of the accepted corporations' investors in Tehran Stock Exchange. According to the research results, it can be asserted that besides financial and nonfinancial factors, the investors should pay attention to the role of financial reporting quality as an important criterion in decision making. Furthermore, the board of directors and audit committee members in corporations can take steps to increase financial reporting quality and decrease the investors' mass behavior through consistent and accurate evaluation and supervision over the process of internal control.

References:

چراغی‌زاده، مرضیه؛ مقدم، عبدالکریم (1397). بررسی تاثیر کنترل‌های داخلی شرکت بر کیفیت گزارشگری مالی در شرکت‌های پذیرفته شده در بورس اوراق بهادار با استفاده از مدل فرانسیس و همکاران. در: آزادشهر: چهارمین کنفرانس ملی مالی، مدیریت مالی و سرمایه‌گذاری.

حاجی‌ها، زهره؛ محمدحسین‌نژاد، سعید (1394). عوامل تأثیرگذار بر نقاط ضعف با اهمیت کنترل ‌داخلی شرکت نمونه‌ای از شرکت‌های پذیرفته‌شده در بورس اوراق بهادار تهران. پژوهش‌های مالی و حسابرسی، شماره 26.

زنجیردار، مجید؛ خجسته، اعظم (1395). بررسی رابطه رفتار توده‌وار سرمایه‌‌گذاران و بازده سهام. سیاست‌های مالی و اقتصادی، شماره 15، ص115-134.

شمس، شهاب؛ اسفندیاری، تیمور (1396). تأثیر رفتار توده‎واری بر عملکرد شرکت‌های سرمایه‌گذاری براساس نظریه‌های مدرن و فرامدرن پرتفوی. پژوهشات مالی، شماره 19، ص51-67.

شیرازیان، زهرا (1398). بررسی تاثیر انواع رفتار گله‌واری تحلیل‌گران بر ارزش سهام شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران با استفاده از تحلیل شبکه. دانش سرمایه‌گذاری، شماره 30، ص19-36.

عزیززاده، طاهره؛ شاملو، ناصر (1398). ارتباط بین ضعف کنترل‌های داخلی و گزارشگری مالی متقلبانه با تأکید بر کیفیت حسابرسی. چشم‌انداز حسابداری و مدیریت، 2(13)، ص53-69.

کرمی، غلامرضا؛ داداشی، ایمان؛ فیروزنیا، امیر؛ کلهرنیا، حمید (1397). بررسی تأثیر کیفیت کنترل‌‌های داخلی بر حداقل‌سازی مالیات در شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران در طی سال‌‌های ۱۳۹۴-۱۳۸۸. دانش حسابرسی، ۱۸(۷۲)، ص۵۵-۲۳.

مرادی شاهکوه، زهرا؛ عرب، روح اله (1397). بررسی رابطه ویژگی‌های کمیته حسابرسی و کیفیت سود در شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران. در: پنجمین کنفرانس ملی پژوهش‌های نوین حسابداری و مدیریت در هزاره سوم.

مقدم، عبدالکریم؛ ظاهری عبده‌وند، سمیه؛ تامرادی، علی (1400). تأثیر قدرت مدیرعامل بر رابطۀ بین معاملات مدیریتی و کیفیت گزارشگری مالی. پژوهش‌های حسابداری مالی، 13(1)، ص87-108.

Abdulahi, A. (2016). Effect of Behavioral Biases on Investment Decisions of Individual Investors in Kenya. An unpublished MSc Finance project, University of Nairobi, 12(3), P.52-68.

Ajao, O. (2020). Internal Control Systems and Quality of Financial Reporting in Insurance Industry in Nigeria. Journal of Finance and Accounting, 22(1), P.21-43.

Amoah, N.Y. & et al. (2017). Internal Control Material Weakness and Real Earnings Management. In Book, Parables, Myths and Risks (pp.1-21). DOI:10.1108/S1041-706020170000020001

Chang, C.H. (2017). Exploring stock recommenders’ behavior and recommendation receivers’ sophistication. J. Econ.Financ., 41, P.1–26.

Chang، S. & Shih, J. (2015). The effects of national culture and behavioral pitfalls on investors’ decision-making: Herding behavior in international stock markets Herding behavior in international stock markets. International Review of Economics and Finance, 37، P.380–392.

Chen, G., Chong, W., Xiaoou, Y. & Zhao, Z. (2019). Material Weakness in Internal Controls and Stock Price Crash Risk. Journal of Accounting, Auditing & Finance, 12(1), P.1-33.

Chung K.H. & Zhang, H. (2012). Corporate governance and institutional ownership. Journal of Financial and Quantitative Analysis; forthcoming, 29(3), P. 125-142.

Dewan, P. (2019). Herding Behaviour in Investment Decision Making: A Review. International Review of Economics and Finance, 43, P.225–239.

Ezeani, E., Salem, R., Kwabi, F., Boutaine, K. & Komal, B. (2022a). Board monitoring and capital structure dynamics: evidence from bank-based economies. Review of Quantitative Finance and Accounting, 58(2), P. 473-498.

Francis, W. & et al. (2019). A two-layer SIR information propagation model with heterogeneity based on coupled network. The Journal of Supercomputing, Vol. 76, No. 3, P. 1657–1679.

Goldstein, I., Jiang, H. & Ng, D.T. (2017). Investor flows and fragility in corporate bond funds. J. Financial Econ, 126(3), P.592-613.

Griffin, A., Lont, H. & Sun, Y. (2010). Agency Problems and Audit fees: Further Tests of Free Cash Flow Hypothesis. Journal of Finance, No.1, P.1-35.

Hyunmin, O. & Park, S. (2022). Does Corporate Governance Affect Labor Investment Efficiency? Sustainability, 14, P.4599. DOI: https://doi.org/10.3390/su14084599

Jonz, Y. (2001). Research on public opinion communication on weibo network based on improved SIR model. Information Science, Vol. 37, No. 6, P.16–22.

Kim, C., Lee, W., Choi, Y.H. & Ahn, J.Y. (2013). Analyzing herd behaviour in global stock markets: An intercontinental comparison. Retrieved February, No.23.

Lai, S., Li, H., Lin, N. & Wu, F. (2019). The Influence of Internal Control Weaknesses on Firm Performance. Journal of Accounting and Finance, 17(6), P.12-34.

Lakonishok, J., Andrei, Sh. & Robert, W.V. (1992). The impact of institutional trading on stock prices. Journal of Finance Economic, No.32, P.23-43.

Levin, A., Lin, C.F. & Chu, J. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite Sample Properties. Journal of Econometrics, Vol.108, P.1-24.

Liang T.P., Ho, Y.T., Li, Y.W. & Turban, E. (2021). What drives social commerce: the role of social support and relationship quality. International Journal of Electronic Commerce Article, 16(2), P.69–90.

Maina, T. (2016). Relationship between investor herding and performance of quoted equities in Kenya. Research Paper University of Nairobi.

Messis, P. & Zapranis, A. (2015). Herding behaviour and volatility in the Athens Stock Exchange. Journal of Risk Finance, 15(5), P.572-590.

Naomi, G. (2018). Influence of Herding Behavior on Investment Decision of SMEs in Bomet County, Kenya. East African Scholars Journal of Economics, Business and Management, 1(2).

Nasrum, M. (2013). The influence of ownership structure, corporate governance, investment decision, financial decision and dividend policy on the value of the firm manufacturing companies listed on the indonesian stock exchange. Journal Managerial, 1(1), P.1-10.

Ngui, T. (2015). The Role of SMEs in Employment Creation and Economic Growth in Selected countries. International Journal of Education and Research, 2(12(.

Qasim, M. (2019). Impact of herding behavior and overconfidence bias on investors’ decision-making in Pakistan. Contents lists available at Growing Science Accounting, 2(3), P.146-159.
DOI: 10.5267/j.ac.2018.07.001

Weng, T.C., Chi, H.Y., Chen & G.Z. (2015). Internal control weakness and information quality. Journal of Applied Finance and Banking, 5(5), P.135.

Yao, J., Ma, C. & He, W.P. (2014). Investor herding behavior of Chinese stock market. International Review of Economics and Finance, Vol.29, P.12–29.

Yeung, W. & Lento, C. (2018). Ownership structure, audit quality, board structure, and stock price crash risk: Evidence from China. Global Finance Journal, 37, P.1–24.