Comparison of the Power of Explaining Theory of Clean Surplus and Prospect Theory in Companies Listed of Tehran Stock Exchange

Subject Areas : Investments

Afshin Badiei ¹ , Saeid Ali Ahmadi ²

1 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.
2 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

Received: 2023-06-15 Accepted : 2023-10-01 Published : 2023-08-23

Keywords: Book Value Per SharE, Prospect Theory, Clean Surplus Theory, Operating Earning of Per Share, Valuation Theory,

Abstract :

Purpose: The common theory for stock price valuation based on accounting data is clean surplus theory. Also, the value function can be determined based on the prospect theory. Therefore, the aim of the current research is to compare the explanatory power of the clean surplus theory and the prospect theory.Research Methodology: Using a systematic method, 152 listed companies were selected as the research sample. The research period is from 2009 to 2022. Research variables include operating earnings, book value and market value. In this research, research hypotheses were tested using multivariate regression and using panel data.Results: The results indicate that the power of explaining the operating earnings of per share is greater in the theory of a clean surplus of the theory of prospect. Also, the results of the research showed that the explanatory power of accrual items of operating earnings of per share is greater in the theory of a clean surplus of the theory of prospect. However, the explanatory power of cash items of operating earnings of per share does not differ between the theory of a clean surplus and the theory of prospect. Originality / Value: Based on the findings of the present research, capital market investors can use the clean surplus theory to determine stock valuation.

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