Forward-looking disclosure and corporate reputation as mechanisms to reduce stock return volatility
Subject Areas :
Mohammad Kiamehr
1
,
Ehsan Kermani
2
,
Ali Norouzi
3
1 - Department of Accounting, Dariun Branch, Islamic Azad University, Dariun, Iran
2 - Department of Accounting, Dariun Branch, Islamic Azad University, Dariun, Iran
3 - Department of Accounting, Shiraz Branch, Islamic Azad University, Shiraz, Iran
Keywords: Corporate reputation, forward-looking financial disclosures, volatility of stock returns,
Abstract :
Purpose: The purpose of this research is to investigate the relationship between the disclosure of prospective financial information and the volatility of stock returns of companies listed on the Tehran Stock Exchange, as well as to investigate the effect of companies' good reputation on this relationship. Methodology: In order to achieve the goals of the research, two hypotheses have been developed that test the meaningfulness of the relationship between the disclosure of prospective financial information, the fluctuations of stock returns and good reputation in the companies listed on the Tehran Stock Exchange. Disclosure of prospective financial information was measured using content analysis method. The statistical method used to test the hypotheses presented in this research is the step-by-step regression analysis method, and the statistical sample of the research includes 120 companies in the years 2018 to 2022. Findings: The results of the analysis of the research hypotheses show that the disclosure of forward-looking financial information leads to a decrease in the volatility of stock returns of companies listed on the Tehran Stock Exchange. Also, disclosure of forward-looking financial information by firms with higher reputations (as opposed to firms with lower reputations) has a greater effect on reducing stock return volatility. Originality: By analyzing the effect of forward-looking financial information on the volatility of stock returns, it expands previous research.
جعفری، علی، صحراری، ناصر، و صلحی فام اصل، ملیحه. (1400). بررسي رابطه بين افشای اطلاعات آینده¬نگر و نوسان¬پذیری بازده سهام، چشم¬انداز حسابداری و مدیریت، 4(50)، 11-1. https://www.jamv.ir/article_141221.html?lang=en
خدامی¬پور، احمد، و محرومی، رامین. (1391). تأثیر افشای داوطلبانه بر مربوط بودن سود هر سهم، حسابداری مدیریت، 5(3)، 12-1. https://sanad.iau.ir/en/Article/816344
رضایی، عبدالمجید، و سلطانی، افشین. (1382). مقدمه¬ای بر تحلیل رگرسیون کاربردی (چاپ دوم)، اصفهان، مرکز نشر دانشگاه صنعتی اصفهان.
عالی¬ور، عزیز. (1365). افشا در گزارشگری مالی، چاپ اول، تهران، موسسه حسابرسی سازمان صنایع ملی و سازمان برنامه.
فخاری، حسین، و فلاح محمدی، نرگس. (1388). بررسی تاثیر افشای اطلاعات بر نقد شوندگی سهام شرکت های پذیرفته شده در بورس اوراق بهادار تهران، تحقیقات حسابداری و حسابرسی، 1(3)، 163-148. doi: 10.22034/iaar.2009.105181
قائمی، محمدحسین، و وطن¬پرست، محمدرضا. (1384). بررسی نقش اطلاعات حسابداری در کاهش عدم تقارن اطلاعاتی در بورس اوراق بهادار تهران، بررسی¬های حسابداری و حسابرسی، 12(3)، 103-85. dor: 20.1001.1.26458020.1384.12.3.3.4
کاظم¬نژاد، مصطفی، و ستایش، محمدحسین. (1389). افشا در حسابداری، مجله حسابدار، 227، 69-66.
نمازی، محمد. (1382ب). بررسی عملکرد اقتصادی بازار بورس اوراق بهادار در ایران. چاپ اول، تهران: انتشارات معاونت اقتصادی وزارت امور اقتصادی و دارایی.
نئوندورف، کیمبرلی¬ای. (1395). راهنمای تحلیل محتوا، ترجمه: حامد بخشی و وجیهه جلائیان بخشنده، چاپ اول، انتشارات جهاد دانشگاهی مشهد.
Aribi, Z. A., & Gao, S. S. (2011). Narrative disclosure of corporate social responsibility in Islamic financial institutions. Managerial Auditing Journal, 27(2), 199-222. doi: 10.1108/02686901211189862
Armstrong, C. S., Core, J. E., Taylor, D. J., & Verrecchia, R. E. (2011). When does information asymmetry affect the cost of capital?. Journal of accounting research, 49(1), 1-40. doi: 10.1111/j.1475-679X.2010.00391.x
Barron, O. E., Kile, C. O., & O'KEEFE, T. B. (1999). MD&A quality as measured by the SEC and analysts' earnings forecasts. Contemporary Accounting Research, 16(1), 75-109. doi: 10.1111/j.1911-3846.1999.tb00575.x
Beyer, A., Cohen, D. A., & Beverly, R. W. (2010). The financial reporting environment: Review of the recent literature. Journal of Accounting and Economics, 50(2–3),296–343. doi: 10.1016/j.jacceco.2010.10.003
Boesso, G., & Kumar, K. (2007). Drivers of corporate voluntary disclosure: A framework and empirical evidence from Italy and the United States. Accounting, Auditing & Accountability Journal, 20(2), 269-296. doi: 10.1108/09513570710741028
Botosan, C. A. (2006). Disclosure and the cost of capital: what do we know?. Accounting and business research, 36(sup1), 31-40. doi: 10.1080/00014788.2006.9730042
Bravo, F. (2016). Forward-looking disclosure and corporate reputation as mechanismsto reduce stock return volatility. Spanish Accounting Review, 19(1), 122–131. doi: 10.1016/j.rcsar.2015.03.001
Brown, S., & Hillegeist, S. A. (2007). How disclosure quality affects the level of information asymmetry. Review of accounting studies, 12, 443-477. doi: 10.1007/s11142-007-9032-5
Bushee, B. J., & Noe, C. F. (2000). Corporate disclosure practices, institutional investors, and stock return volatility. Journal of Accounting Research, 171-202. doi: 10.2307/2672914
Cormier, D., Ledoux, M. J., Magnan, M., & Aerts, W. (2010). Corporate governance and information asymmetry between managers and investors. Corporate Governance: The International Journal of Business in Society, 10(5), 574–589. doi: 10.1108/14720701011085553
Dang, M., Puwanenthiren, P., Nguyen, M. T., Hoang, V. A., Mazur, M., & Henry, D. (2022). Does managerial tone matter for stock liquidity? Evidence from textual disclosures. Finance Research Letters, 48, 102917. doi: 10.1016/j.frl.2022.102917
Dey, P. K., Roy, M., & Akter, M. (2020). What determines forward-looking information disclosure in Bangladesh?. Asian Journal of Accounting Research, 5(2), 225-239. doi: 10.1108/AJAR-03-2020-0014
Easley, D., & O'hara, M. (2004). Information and the cost of capital. The journal of finance, 59(4), 1553-1583. doi: 10.1111/j.1540-6261.2004.00672.x
Eng, L. L., & Mak, Y. T. (2003). Corporate governance and voluntary disclosure. Journal of accounting and public policy, 22(4), 325-345. doi: 10.1016/S0278-4254(03)00037-1
Faden, V., & Bobko, P. (1982). Validity shrinkage in ridge regression: A simulation study. Educational and Psychological Measurement, 42(1), 73-85. doi: 10.1177/0013164482421009
Fakhari, H., & Fallah Mohammadi, N. (2009). Investigating the Impact of Information Disclosure on Liquidity of Companies Listed in Tehran Stock Exchange. Accounting and Auditing Research, 1(4), 148-163. doi: 10.22034/iaar.2009.105181
Francis, J. R., Khurana, I. K., & Pereira, R. (2005). Disclosure incentives and effects on cost of capital around the world. The accounting review, 80(4), 1125-1162. doi: 10.2308/accr.2005.80.4.1125
Francis, J., Nanda, D., & Olsson, P. (2008). Voluntary disclosure, earnings quality, and cost of capital. Journal of accounting research, 46(1), 53-99. doi: 10.1111/j.1475-679X.2008.00267.x
Ghaemi, MH., Vatanparast, MR. (2005). Role of accounting information in information asymmetry in Tehran Stock. Accounting and Auditing Review, 12(3), 85-103. dor: 20.1001.1.26458020.1384.12.3.3.4 [In Persian]
Gietzmann, M., & Ireland, J. (2005). Cost of capital, strategic disclosures and accounting choice. Journal of Business Finance & Accounting, 32(3‐4), 599-634. doi: 10.1111/j.0306-686X.2005.00606.x
Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of accounting and economics, 40(1-3), 3-73. doi: 10.1016/j.jacceco.2005.01.002
Haggard, S., MacIntyre, A., & Tiede, L. (2008). The rule of law and economic development. Annu. Rev. Polit. Sci., 11, 205-234. doi: 10.1146/annurev.polisci.10.081205.100244
Hammond, S. A., & Slocum Jr, J. W. (1996). The impact of prior firm financial performance on subsequent corporate reputation. Journal of Business Ethics, 15(2), 159-165. doi: 10.1007/BF00705584
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of accounting and economics, 31(1-3), 405-440. doi: 10.1016/S0165-4101(01)00018-0
Helm, S. (2007). The role of corporate reputation in determining investor satisfaction and loyalty. Corporate reputation review, 10, 22-37. doi: 10.1057/palgrave.crr.1550036
Husillos, J., & Álvarez-Gil, M. J. (2008). A stakeholder-theory approach to environmental disclosures by small and medium enterprises (SMES). Revista de Contabilidad-Spanish Accounting Review, 11(1), 125-156. https://revistas.um.es/rcsar/article/view/384521
Hussainey, K., & Aal‐Eisa, J. (2009). Disclosure and dividend signalling when sustained earnings growth declines. Managerial Auditing Journal, 24(5), 445-454. doi: 10.1108/02686900910956801
Hussainey, K., Schleicher, T., & Walker, M. (2003). Undertaking large-scale disclosure studies when AIMR-FAF ratings are not available: the case of prices leading earnings. Accounting and Business Research, 33(4), 275-294. doi: 10.1080/00014788.2003.9729654
Jafari, A., Sahrarey, N., & Solhi Fam Asl, M. (2021). Investigating the relationship between prospective information disclosure and stock volatility. Journal of Accounting and Management Vision, 4(50), 1-11. https://www.jamv.ir/article_141221.html?lang=en [In Persian]
Khodamioor A., & Mahroomi R. (2012). Effect of voluntary disclosure on value relevance of earnings per share. Management Accounting, 5(3), 1–12. https://sanad.iau.ir/en/Article/816344 [In Persian]
Kristandl, G., & Bontis, N. (2007). The impact of voluntary disclosure on cost of equity capital estimates in a temporal setting. Journal of intellectual capital, 8(4), 577-594. doi: 10.1108/14691930710830765
Leuz, C., & Verrecchia, R. E. (2000). The economic consequences of increased disclosure. Journal of Accounting Research, 91-124. doi: 10.2307/2672910
Lara, J. M. G., Osma, B. G., & Penalva, F. (2012). Accounting conservatism and the limits to earnings management. https://www.wiwi.hu-berlin.de/en/professuren/bwl/finance/seminars/papers-fin-acc-res-seminars/15w/garcia_lara.pdf
Li, C., Yan, Y., Liu, X., Wan, S., Xu, Y., & Lin, H. (2023). Forward looking statement, investor sentiment and stock liquidity. Heliyon, 9(4). doi: 10.1016/j.heliyon.2023.e15329
Linsley, P. M., Shrives, P., & Kajuter, P. (2008). Risk reporting: development, regulation and current practice. International Risk Management (pp. 185-207). https://pure.york.ac.uk/portal/en/publications/risk-reporting-development-regulation-and-current-practice
Lopes, A. B., & de Alencar, R. C. (2010). Disclosure and cost of equity capital in emerging markets: the Brazilian case. The International Journal of Accounting, 45(4), 443-464. doi.org/10.1016/j.intacc.2010.09.003
Mercel, M. (2004). How do investors assess the credibility of management disclosures? Accounting Horizons, 18(3), 185–196. doi: 10.2308/acch.2004.18.3.185
Michelon, G., Boesso, G., & Kumar, K. (2013). Examining the link between strategic corporate social responsibility and company performance: An analysis of the best corporate citizens. Corporate Social Responsibility and Environmental Management, 20(2), 81-94. doi: 10.1002/csr.1278
Mo, Y. A. N. G., & DONG Dayong, X. (2022). Risk InformationDisclosureand Stock Liquidity: Based onTextual AnalysisofAnnualReportofA-shareListed Firmsin China. Journal of Systems & Management, 31(4), 794.doi: 10.3969/j.issn.1005-2542.2022.04.015
Pastor, L., & Veronesi, P. (2003). Stock valuation and learning about profitability. Journal of Finance, 58(5), 1749–1789. doi: 10.1111/1540-6261.00587
Prencipe, A. (2004). Proprietary costs and determinants of voluntary segment disclosure: evidence from Italian listed companies. European Accounting Review, 13(2), 319-340. doi: 10.1080/0963818042000204742
Rajgopal, S., & Venkatachalam, M. (2011). Financial reporting quality and idiosyncratic return volatility. Journal of Accounting and Economics, 51(1-2), 1-20. doi: 10.1016/j.jacceco.2010.06.001
Rezaei. A., Soltani, A. (2003). An introduction to applied regression analysis. Isfahan University of Technology Publication Center. [In Persian]
Rodríguez-Domínguez, L., & Gámez, L. C. N. (2014). Corporate reporting on risks: Evidence from Spanish companies. Revista de Contabilidad-Spanish Accounting Review, 17(2), 116-129. doi: 10.1016/j.rcsar.2013.10.002
Schleicher, T., & Walker, M. (1999). Share price anticipation of earnings and management's discussion of operations and financing. Accounting and Business Research, 29(4), 321-335. doi: 10.1080/00014788.1999.9729591
Schwarzkopf, S. (2007). Transatlantic invasions or common culture? Modes of cultural and economic exchange between the American and the British advertising industries, 1945–2000. Anglo-American media interactions, 1850–2000 (pp. 254-274). London: Palgrave Macmillan UK. doi: 10.1057/9780230286221_14
Uyar, A., & Kılıç, M. (2012). Value relevance of voluntary disclosure: evidence from Turkish firms. Journal of Intellectual Capital, 13(3), 363-376. doi: 10.1108/14691931211248918
Venkatachalam, M. (2000). Discussion of corporate disclosure practices, institutional investors, and stock return volatility. Journal of Accounting Research, 38, 203-207. doi: 10.2307/2672915
Wang, M., & Hussainey, K. (2013). Voluntary forward-looking statements driven by corporate governance and their value relevance. Journal of accounting and public policy, 32(3), 26-49. doi: 10.1016/j.jaccpubpol.2013.02.009