The Relationship between Non-Transparent Financial Reports and the Risk of Prospective Decline in Stock Price in Companies with Low Percentage of Free Float Stock

Subject Areas :

Roya Darabi ¹ , Maryam Riazi ²

1 - ASSOCIATE PROFESSOR , ESLAMIC AZAD UNIVERSITY, SOUTH TERHAN BERANCH
2 - کارشناس ارشد حسابداری دانشگاه آزاداسلامی واحد تهران جنوب

Received: 2016-03-16 Accepted : 2016-06-19 Published : 2016-01-21

Keywords: Risk, Non-transparent financial reporting, Risk of Prospective Decline, Future Stock Price Decline, Free float Stocks,

Abstract :

To satisfy the capital suppliers of enterprises, management people always attempt to publish information in a way that meets their requirements. As a result, it seems that the inconsistency and instability of profit will affect the risk of stock prices reduction. Transparency of financial information has been one of the most influential variables in determining investment strategy in the financial markets. To achieve their objectives, that is, getting appropriate return from their investments, investors need transparent and coherent information on time. Nowadays, one of the points that attracts investors’ attention in selection and purchase of stocks is the amount of company’s free float stock. This study analyzes non-transparent financial reporting and its impact on stock prices of the firms listed in the Tehran Stock Exchange by taking into account the free float shares in the period from 2007 to 2014. Overall, a group of 458 were under study, of which 118 companies listed on the Stock Exchange were selected as the statistical sample through systematic sampling. To collect the literature review, the research has been done library-based and to gather statistical data financial statements and subsidiary notes have been used. Data analysis is done in two parts: descriptive and inferential statistics. To analyze data and get the research results Excel and Eviews8 softwares have been utilized. This study is to test a hypothesis through logistic regression model.  The results demonstrated that there is a significant relationship between non-transparent financial reporting and future stock price crash risk in companies with low free float stock.