The sensitivity of equity returns to investors' sentiments despite the quality of financial disclosures and corruption

The sensitivity of equity returns to investors' sentiments despite the quality of financial disclosures and corruption

Subject Areas : Financial Knowledge of Securities Analysis

javad moghaddam ¹ (Ph.D. Student, Department of accounting, Faculty of Management, Tehran North Branch, Islamic Azad University, Tehran, Iran)
Omid Faraji ² (Associate Professor of Accounting, Department of Financial Management and Accounting, College of Farabi, University of Tehran, Qom, Iran. (corresponding author) )
Alireza Heidarzadeh Hanzaee ³ (Assistant Prof. Department of Financial Management, Tehran North Branch, Islamic Azad University, Tehran-Iran)
Malektaj Maleki Oskouei ⁴ (Assistant Professor, Department of Financial Management, Faculty of Management, Tehran North Branch, Islamic Azad University, Tehran, Iran)

Received: 2023-06-24 Accepted : 2023-09-02 Published : 2024-09-26

Keywords: Investor sentiments, sensitivity of equity return, quality of financial information disclosure and corruption.,

Abstract :

Return on equity as one of the profitability ratios shows the company's success in obtaining investment returns, which is influenced by the emotional behavior of investors. However, the sensitivity of equity returns to investors' sentiments can be changed according to the transparency of the information environment, such as the quality of information disclosure and corruption. Therefore, due to the lack of research in this regard, the present study examines the sensitivity of equity returns to investors' sentiments despite the quality of financial information disclosure and corruption in companies listed on the Tehran Stock Exchange. In this regard, a sample consisting of 130 listed companies was selected and tested during the period of 2011-2014. The results of the research hypotheses test showed that investors' sentiments have a negative and significant effect on the sensitivity of equity returns. Also, optimistic sentiments lead to a decrease in the sensitivity of equity returns, while pessimistic sentiments have no significant effect. In addition, financial reporting disclosure has a moderating role in the relationship between investor sentiments and equity return sensitivity, and quality information disclosure has a significant effect on reducing the impact of pessimistic sentiments on equity return sensitivity, but has no effect on the sensitivity to optimistic sentiments. Finally, corruption does not play a moderating role in the relationship between investor sentiments and equity return sensitivity, it has only weakened the negative effect of optimistic sentiments on equity return sensitivity.