Investigating the relationship between profit per share prediction error and abnormal returns of new companies in Tehran Stock Exchange

Number of pages: 120 File Format: word File Code: 29748
Year: 2011 University Degree: Master's degree Category: Librarianship
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  • Summary of Investigating the relationship between profit per share prediction error and abnormal returns of new companies in Tehran Stock Exchange

    Dissertation for master's degree

    Major: accounting

    Abstract:

    Prediction of profit per share is of particular importance in investments, because it follows the changes in stock prices and the direct reaction of the capital market. On the other hand, in the current business environment, due to the rapid changes in technology and financial conditions, managers do not have a correct assessment of the company's business prospects, and therefore the occurrence of errors in accounting estimates is inevitable.

    This issue is more important in the case of newly listed companies, due to the lack of trading history and as a result of little historical information, and the information asymmetry between managers and potential investors is high in these companies. Investors rely on information such as profit per share forecasts provided by companies to make decisions about buying, selling or holding stocks. Therefore, the accuracy of this forecast, which is the basis of their decision-making, is important.

    In this research, the relationship between the prediction error of earnings per share and the abnormal returns of companies newly admitted to the Tehran Stock Exchange at two time points of the year of entering the stock exchange and one year after entering and being on the stock exchange, based on the data of 84 companies during the period of 1382 to 1387, has been examined. The results of the research, using multivariate linear regression analysis, show that there is a significant positive relationship between the forecast error of profit per share and the abnormal returns of the shares of newly-arrived companies, in both time periods under study, and the type of industry also affects this relationship. Investing in the capital markets, especially the stock exchange, by individuals and legal entities, is the most important tool for making the right decisions and obtaining the expected benefit and optimal and favorable use of financial facilities, access to correct and timely information and accurate and realistic analysis.

    Among the information that the users of the financial information of the companies pay attention to in their decisions is the information related to the returns of the companies' shares. Meanwhile, any information that is somehow related to the company and related to the performance and financial status of the company will have an impact on the stock returns. This information affects the stock price and, consequently, the stock yield, and if it contains information, it can affect the behavior of users, especially actual and potential shareholders, and cause an increase or decrease in the stock price and create abnormal returns (a return lower or higher than the market return).

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Chapter One

    General Research

     

     

     

     

     

     

     

     

     

     

     

     

    1-1 Introduction

    One of the purposes of accounting information is to help users predict future cash inflows. to the business unit and consequently the investment return forecast. Part of the influencing variables on the stock returns of companies in the stock market is due to the financial information that is prepared through the accounting system. The impact of this information is very complex and somewhat unknown. If the accounting information is useful for determining the return, then the changes in the accounting data should cause a change in the returns of the companies' shares.

    The stock exchange as a symbol of the capital market of Iran is highly influenced by changes in economic cycles. Investment managers and other natural and legal persons who deal in stocks and other financial assets in this market need to examine various factors affecting the return of their investments in order to maintain and increase the value of their investment portfolio.

    Predictions of profit per share in investments are of special importance, because it is considered an important factor in stock evaluation methods and in most cases, it is a basic part of stock selection methods.The importance of this prediction depends on how much it deviates from reality. The lower the amount of this deviation, the more accurate the prediction is, and this issue is considered important for the user and producer.

    Decision makers need useful and useful information to make accurate and correct decisions. Consequently, most of the information should be provided to them through the company's financial reports. Most users emphasize items that they think are the most relevant information. The information related to the profit of each share is a scale that is considered important and relevant by most users. Direct and indirect observations confirm that the reported profit per share and the predicted profit per share have a direct effect on the market price of ordinary shares, and investors demand this information. In addition to the profit per share presented through financial statements, the management is obliged to provide users with a future estimate of the company's prospects in the form of the predicted profit per share.

    Correct decision makes the investor reach his expectations and expectations from the capital and by providing the correct information, the company can In this research, the relationship between the profit per share prediction error and the abnormal return of shares of companies listed on the Tehran Stock Exchange at two time points, the year of entering the stock exchange and one year after entering the stock exchange, is investigated. We also state the objectives of the research. The theoretical framework of the research, which was the main basis of the research question and topic, is given in this chapter, and the research assumptions and the analytical model are also mentioned. They studied and researched a sample of 276 companies for a 10-year period from 1965 to 1974. For each company in this sample and for each year that this sample was researched, they calculated the unexpected changes in net profit, then with the method based on the market model, they tried to calculate the abnormal stock returns related to the unexpected change in net profit. By comparing the unexpected changes in profit with abnormal stock returns, these researchers came to the conclusion that the greater the intensity of changes in unexpected net profit, the stock market will react more, this result is compatible with the application of the pricing model of capital assets and with the method based on the usefulness of information in terms of decision-making. Tehran Securities has paid. His purpose of conducting this research is to compare the return of new shares compared to the return of the stock exchange index in the short and long term. The results of the research indicate that the new companies had an average of 11.7% excess return (abnormal) during the first 4 months of trading and a 16.4% loss in the long-term period of 3 years (Zhakri, 1375, p. 45). 1. Hamid Khaleghi Moghadam (1377) in his doctoral dissertation, he analyzed the accuracy of the profit forecast of new companies listed on the Tehran Stock Exchange and the factors affecting it for the years 1373 to 1375 were examined. Among the factors that have been effective on the accuracy of the company's profit forecast and have been examined in this research, there are variables such as: company size, company life, stock price, and the degree of financial leverage of the company. He came to the conclusion that there is an inverse relationship between stock price changes and the accuracy of profit forecasting, and there is a direct relationship between the accuracy of profit forecasting and the size of new companies entering the Tehran Stock Exchange.

    Abde Tabrizi and Demouri (1382) in a research titled identifying the factors affecting the long-term returns of stocks newly admitted to the Tehran Stock Exchange, examined companies that were listed on the Tehran Stock Exchange for the first time. In this research, new companies entering the market during the years 1369 to 1374 have been investigated, and the factors affecting the long-term efficiency of these companies have been specifically tested. These factors include the volume of annual stock transactions, company size, and short-term returns from buying and selling shares of related companies. The results of this research show that there is a higher short-term return on the shares of new companies entering the market compared to the market index.

  • Contents & References of Investigating the relationship between profit per share prediction error and abnormal returns of new companies in Tehran Stock Exchange

    List:

    Abstract: 1

    Introduction: 2

    Chapter One: Research Overview

    1-1 Introduction 4

    2 1 Study history. 5

    3 1 statement of the problem 6

    4 1 theoretical framework of the research. 8

    5 1 The importance and necessity of research. 10

    6 1 research objectives. 10

    7 1 study limits. 13

    1-7-1 Research location. 14

    2-7-1 The time domain of research. 14

    3-7-1 Subject area of ??research. 14

    8 1 research hypotheses. 14

    9 1 Definition of words and terms. 14

    Chapter Two: Review of Research Literature

    1-2 Introduction 18

    2 2 Financial Market. 18

    1 2 2 classification of financial markets. 19

    1 1 2 2 money market. 19

    2 1 2 2 capital market 19

    3 2 usefulness of profit information content and capital market reaction 20

    4 2 Ball and Brown research. 22

    5 2 concepts of profit in accounting. 22

    6 2 History of profit forecasting 24

    7 2 Forecasted dividends 25

    8 2 Importance of forecasted dividends 26

    9 2 Accuracy of profit forecasting in IPO 26

    10 2 Profit forecasting methods 27

    1 10 2 Box Jenkins model. 28

    2 10 2 random walk model. 29

    11 2 Returns 30

    12 2 Realized returns versus expected returns. 30

    1 12 2 realized return 31

    2 12 2 expected return. 31

    13 2 components of return 31

    1 13 2 profit received. 31

    2 13 2 Profit (loss) of capital 31

    14 2 Abnormal stock return 32

    15 2 Hypotheses raised about short-term abnormal return in initial offerings 35

    1 15 2 Hypothesis of information asymmetry. 35

    1 1 15 2 Hypothesis of information asymmetry based on Baron's model. 35

    2 1 15 2 Hypothesis of information asymmetry based on Rock model. 36

    2 15 2 hypothesis of marking. 38

    3 15 2 Assumptions of fleeting tendencies and interests. 39

    4 15 2 Hypothesis of overreaction of investors. 40

    5 15 2 Hypothesis of speculative bubble and hypothesis of hot stock markets. 41

    16 2 Application of short-term abnormal return theories and theories in the Iranian stock market. 42

    17 2 Research background. 43

    1 17 2 Foreign research. 43

    2 17 2 internal research. 46

    Chapter 3: Research implementation method

    1-3 Introduction 49

    2 3 Research method. 49

    3 3 study community and statistical sample. 50

    4-3 Research model and method of measuring variables 51

    5 3 Data collection methods and tools 54

    6 3 Data analysis methods 54

    1 6 3 Pearson correlation analysis and simple linear regression. 55

    7 3 internal and external validity of the research. 59

    Chapter Four: Data Analysis

    1-4 Introduction 62

    2 4 Descriptive indices of variables 62

    3 4 Method of testing research hypotheses. 66

    4 4 Analysis of research hypotheses. 66

    5 4 Checking the assumption of normality of the variables 67

    6 4 Summary of the analysis of hypotheses separately. 68

    1 64 Analysis and test of the first main hypothesis: 68

    1 1 6 4 Analysis and analysis of the test of the first main hypothesis in the presence of control variables. 71

    2 6 4 Analysis and testing of the second main hypothesis: 77

    1264 Analysis and testing of the second main hypothesis in the presence of control variables. 81

    364 Analysis and testing of the sub-hypothesis. 86

    Chapter Five: Conclusions and Suggestions

    1-5 Introduction 89

    2 5 Evaluation and explanation of the results of hypothesis testing according to the conditions of the variables 90

    1 2 5 Results of the first main hypothesis. 90

    1 1 2 5 Results of the first main hypothesis in the presence of control variables. 90

    2 25 results of the second main hypothesis 91

    12 25 results of the second main hypothesis in the presence of control variables. 91

    32 5 Sub-hypothesis results. 92

    35 general conclusions of the research. 92

    45 suggestions 92

    145 suggestions based on the findings of research hypotheses. 93

    245 suggestions based on general research findings. 93

    345 suggestions for future research. 93

    5 5 research limitations. 94

    Appendices

    Appendix A: Table related to industries and names of statistical sample companies. 96

    Sources and sources

    Persian sources: 100

    Latin sources: 103

    Internet sources: 106

    Latin summary.107

    Source:

     

    Sources and sources

     

     

     

     

     

     

     

    Persian sources:

    Azar, A and Mansour Momeni, 1385, "Statistics and its application" In Management", Tehran, Semat Publications, second volume.

    Azad, M., 2015, "Information content of corporate profit forecasting", master's thesis, Allameh Tabatabai University.

    Ismaili, S., 2015, "The relationship between profit quality and stock returns", master's thesis, Allameh Tabatabai University.

    Yazdinia, N. and Nasrin Alineghian. 1389, "Investigating the relationship between profit forecasting error and financial and commercial risk on companies listed on the Tehran Stock Exchange", Accounting Research, No. 7

    Belkoei, A., Ali Parsaian, 1381, "Accounting Theories", Cultural Research Office.

    Bahram Faran, 1383, "Investigating the effect of accounting variables on the abnormal return of shares of companies listed on the Tehran Stock Exchange", Review Accounting and Auditing, No. 37, pp. 23-50.

    Pi Nu, R., translated by: Ali Jahankhani and Ali Parsaian, 1382, "Financial Management", Samt Publications, 8th edition.

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Investigating the relationship between profit per share prediction error and abnormal returns of new companies in Tehran Stock Exchange