An Empirical Test of Capital Market Rule Behavior: Political Uncertainty and the Capital Market Information Environment

Subject Areas : Financial Knowledge of Securities Analysis

Hossein  Sharifirad ¹ (Ph.D. Student , Department of Accounting , Qazvin Branch , Islamic Azad University, Qazvin , Iran)
Negar  Khosravipour ² (. Assistant Professor, Accounting Department, Islamic Azad University Central Tehran Branch, Tehran, Iran)
sina  kheradyar ³ (استادیار، دانشکده مدیریت و حسابداری دانشگاه آزاد اسلامی واحد رشت، ایران)
Mohammadreza  Vatanparast ⁴ (Department of Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran)

Received: 2022-01-11 Accepted : 2022-01-11 Published : 2021-11-22

Keywords: Market Rule, Political Uncertainty, Capital Market Information Env,

Abstract :

The political uncertainty caused by the instability of management and the political hypothesis leads to a market failure. In high-risk information environments where accounting information is less predictable, political uncertainty exacerbates market behavior. The purpose of this study is to investigate the political uncertainty caused by the volatility of management and size of the company under the influence of the capital market information environment against the rules of voluntary accruals and the capital cost of ordinary shares of companies. For this purpose, the data of 100 companies listed in Tehran Stock Exchange during the period 1387-1396 were examined and tested using combined data. The results show that the political uncertainty caused by management instability under the influence of the capital market information environment is negatively and significantly correlated with the cost of ordinary equity capital. Also, there is a positive and significant relationship between the political uncertainty associated with the size of the company affected by the capital market information environment and the cost of ordinary equity capital.

References:

• ابراهیمی کردلر، علی و شهریاری، علیرضا. (1388). بررسی رابطه بین هزینه‌های سیاسی و محافظه‌کاری (فرضیه سیاسی) در بورس اوراق بهادار تهران. بررسی‌های حسابداری و حسابرسی. دوره 16. شماره 57. صص 3-16.


• افلاطونی، عباس. (1395). استفاده از اطلاعات محرمانه در معاملات سهام و تاثیر آن بر هزینه سرمایه سهام عادی. دانش حسابداری مالی. دوره 3. شماره 2. صص 131-148.


• بادآور نهندی، یونس و تقی زاده خانقاه، وحید. (1397). تأثیر ارتباطات سیاسی بر سرمایه‌گذاری بیشتر از حد و عملکرد شـرکت . فصلنامه بررسی‌های حسابداری و حسابرسی. دوره 2. شماره 25. صص 181-198.


• تامرادی، علی، رستمی نیا، رضا و سرکمریان، سعیده. (1397). بررسی تاثیر ارتباطات سیاسی بر رابطه بین حسابرس و شفافیت اطلاعات حسابداری در بورس اوراق بهادار تهران. فصلنامه پژوهش در حسابداری و علوم اقتصادی. سال 2. شماره 2. صص 1-16.


• شهریاری، سارا و سلیم، فرشاد. (1393). بررسی و آزمون قیمت‌گذاری نادرست اقلام تعهدی غیرعادی در بورس اوراق بهادار تهران طی سال‌های 1381 تا 1389. مدیریت دارایی و تامین مالی. سال 2. شماره 3. صص 1-16.


• رضایی، فرزین و ویسی حصار، ثریا. (1393). اثر روابط سیاسی با دولت بر رابطه بین تمرکز مالکیت با کیفیت گزارشگری مالی و هزینه سهام عادی. بررسی های حسابداری و حسابرسی. دوره 21. شماره 4. صص 449-470.


• فخاری، حسین و رضائی پیته نوئی، یاسر. (1396). ارائه مدلی برای سنجش محیط اطلاعاتی شرکت. فصلنامه حسابداری مالی. سال 9. شماره 33. صص 121-147.


• قادری، بهمن، دیدار، حمزه و کفعمی، مهدی. (1398). بررسی رابطه بین هزینه‌های سیاسی و شکاف مالیاتی: شواهدی تجربی از بورس اوراق بهادار تهران. پژوهش‌های تجربی حسابداری. سال 8. شماره 32. صص 161-193.


• مجتهد زاده، ویدا و قدرتی، منا. (1391). اثر بی قاعدگی اقلام تعهدی بر قیمت‌گذاری شرکت‌ها. مجله مهندسی مالی و مدیریت اوراق بهادار. شماره 10. صص 119-135.


• نیکبخت، محمدرضا و طاهری، زهرا. (1393). بررسی رابطه بین سازوکارهای راهبری شرکتی و ریسک سیستماتیک. بررسی های حسابداری و حسابرسی. دوره 21. شماره 1. صص 109-126.


• Alzahrani, M., & Rao, R. P. (2014). Managerial behavior and the link between stock mispricing and corporate investments: Evidence from market-to-book ratio decomposition. The Financial Review, 49(1), 89116.


• Boubakri Nar jess, Omrance Guedhami Dev Mishra, Walid Saffar. (2012).“political connections and the cost of equity capital”, journal of corporate finance journal vol.18, Issue 3, June 2012, pp.547-559.


• Chan, L-C Ann; Edward Lee and Stephen Lin. (2009). The Impact of Accounting and Business Research, 40 (summer), pp. 178-192.


• Chan, L. K., Jegadeesh, N., & Lakonishok, a. J. (2007). Momentum strategies. Journal of Finance, 51(5), 1681-1713.


• Chaney, P.K., Faccio, M., Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1–2), 58–76.


• Chen,Y.& Chen,D.& Wang.W. & Zheng, D.(2018). Political uncertainty and firms' information environment: Evidence from China. Journal of Accounting and Public Policy, vol.20, Issue 5, June 2018, pp.1-26.


• Chi, J., & Gupta, M. (2009). Overvaluation and earning management. Journal of Banking and Finance, 33(3), 1652-1663.


• Cormier, D, Houle, S and Ledoux, M ,(2013), "The Incidence of Earnings Management on Information Asymmetry in an Uncertain Environment: Some Canadian Evidence". Journal of International Accounting, Auditing and Taxation. No 22, PP. 26–38


• Desai, H., S. Rajgopal, and M. Venkatachalam. (2004). “Value-glamour and accruals mispricing: one anomaly or two?” The Accounting Review 79, 355-386.


• Fama, E.F. and K.R.French.Dissecting Anomalies.Journal of Finance.2008.Vol.63,1653-1678.


• Fan, J.P.H., Wong, T.J. and Zhang, T. (2007), Politically-connected CEOs, corporate governance, and post-IPO performance of China,s newly partially-privatized firms, J,ournal of Financial Economics, Vol. 84 No. 2, pp. 330-357.


• Francis, J., R. Lafond, P. Olsson, and K. Schipper (2005). “The Market Pricing Of Accruals Quality.” Journal of Accounting and Economics 39, Pp: 295-327.


• Khan, A, Dessalegn, G, Mihret, M &Badrul Muttakin , (2016),"Corporate political connections, agency costs and audit quality ", International Journal of Accounting & Information Management, Vol. 24 Iss 4 pp. 357 ˚ 374.


• Lee, W. & Wang, L. (2016). Do political connections affect stock price crash risk? Firm-level evidence from China. Review of Quantitative Finance and Accounting, 1, 1-34.


• McNichols, M. (2002). Discussion of The Quality of Accruals and Earnings: The Role of Accruals Estimation Errors, The Accounting Review,77:61–9.


• Pan, X., Tian, G. G. (2017). Political connections and corporate investments: Evidence from the recent anti-corruption campaign in China. Journal of Banking and Finance, In Press, DOI: 10.1016/j.jbankÞn.2017.03.005.


• Pantzalis, C., Park, J.C. (2014). Agency Costs and Equity Mispricing. Asia-Pacific Journal of Financial Studies, Vol. 43, Pp. 89–123.


• Piotroski, J. D. (2004). Value investing: The use of historical financial statement information to separate winners from losers. Journal of Accounting Research, 38(3), 1-41.


• Robert, Hagerman, L zmijewski. Mark, 1978, Some Economic Determinants of Accounting Policy Choice, Journal of Accounting and Economics 1979; 1: 141-161.


• L and Zhang.H.2007. “ Can the earnings fixation hypothesis explain the accrual anomaly?”, Working paper.


• Sloan, R.. (1996).” Do stock prices fully reflect information in accruals and cash flows about future earnings?” The Accounting Review 71, 289-315.


• Trinugroho, I. & Rinofah, R. (2011). The Effect of Mispricing on Investment of Indonesian Firms: Do Financial Constraints Matter? Middle Eastern Finance and Economics, 9 (1): 14-23.


• Wang, L. (2015). Protection or expropriation: Politically connected independent directors in China. Journal of Banking & Finance, 55, 92-106.


• T.(2004).”Evaluating the ‘accrual-fixation’ hypothesis as an explanation for the accrual anomaly”. Washington University , working paper.


• Zhang, X. F. (2007). Information Uncertainty and Stock Returns. Journal of Finance, Vol. 61, Pp. 105–137.