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An analysis of the factors related to changes in dividends and changes in future profits in Iran's capital market

Number of pages: 219 File Format: word File Code: 29814
Year: 2010 University Degree: Master's degree Category: Librarianship
Tags/Keywords: Book value of shares - Changes in earnings per share - Dividend changes - Equity - Future profit changes - market value - Market value of shares - Return on equity
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  • Summary of An analysis of the factors related to changes in dividends and changes in future profits in Iran's capital market

    Dissertation for Master's Degree

    Trend: Accounting

    Abstract:

    The purpose of this research is to investigate the relationships between changes in dividends, earnings per share and changes in earnings per share with changes in future earnings. In this research, information related to the balance sheet, profits and cash flow of 100 companies active in the Tehran Stock Exchange for the fiscal years 1380 to 1385 have been used. To determine the relationships, 12 hypotheses were proposed and correlation and regression tests were used to test them. Hypotheses were proposed based on the degree of correlation between changes in dividends, earnings per share and changes in earnings per share with changes in future profits for companies that have the ability to predict cash flows, the ratio of market to book value and return on equity. The results of the research show that between changes in dividends, earnings per share and changes in earnings per share for companies with higher market to book value, return on equity higher as well as lower cash flow predictability, there is a stronger relationship with changes in future profits. which among the main variables of profit per share and virtual variables of market to book value has a better effect on future profit changes. Also, the value of correlation coefficient (R) increased from 0.490 for the three main variables to 0.621 for the total of main and virtual variables, which indicates the appropriateness of choosing the mentioned virtual variables.

    Key words: changes in dividend, changes in profit per share, changes in future profit, market to book value, return on equity Stock.

    Introduction:

    Given that Iran's economy has extreme fluctuations and funds are mainly directed towards speculation, therefore, it is of particular importance to create conditions for investors to choose investment in securities and company shares among various investment options. In other words, with a better understanding of the factors affecting the supply and demand of shares in the stock exchange, which leads to greater transparency of the stock exchange, the transfer of capital from non-productive activities to productive activities and the creation of employment and economic prosperity will be provided. The theory of dividend signaling is based on the fact that the management of a company has more information about the company's future prospects than the company's shareholders. According to this theory, if the company has more dividends than what is predicted by the market stated, this issue may be a sign that the company's future financial outlook is brighter than its expected status. If the managers of a company believe in the signaling theory, they will always be very cautious about the message that can be inferred from their dividend decision to the investors. Even if the company has some attractive investment opportunities that are required to retain earnings to finance it, the management may abandon them if accepting these opportunities leads to preventing the payment of dividends expected by investors and sending an unfavorable message to the market. Therefore, it seems that if a company makes a decision on dividend slow, those investors whose tastes are in harmony with the company's dividend policy and those investors who consider this policy as good news will buy shares and will remain shareholders of the company until this policy changes. In fact, the announcement of dividends contains information about the company's future prospects. Therefore, the market reaction on the date of the announcement is a test for the information content and signaling of dividends. According to the signaling hypothesis, this research seeks to investigate and identify the relationships between changes in dividends, earnings per share and changes in earnings per share with changes in future earnings and taking into account variables such as predictability of cash flows, market to book value and return on equity. Therefore, it can be expected that the investors of the country's capital market, with a better understanding of the effects of changes in dividends, profit per share and changes in profit per share, regarding the future profits of various industries, will invest in the shares of companies that will enable them to obtain maximum returns and this will lead to the prosperity of the capital market and the country's economy.

    Division of profit can attract new shareholders for the company. This question, does the change of dividend contain information about changes in future profits of companies? It is a topic that has attracted a lot of attention in research and is considered as a test of the dividend signaling hypothesis[1]. So that company managers increase dividends in order to convey a clear perspective of profitability and more positive cash flows. In this research, the hypothesis of dividend marking has been examined and tested by considering the effects of variables such as the predictability of cash flows, the ratio of market value to book value, and return on equity. In the first chapter, after stating the problem, the importance and necessity of the research topic and research objectives are stated, and then we present the theoretical framework, analytical model, and research hypothesis. 2-1 Statement of the problem:

    Dividend[2] is the return that ordinary shareholders receive from the company for the investment they have made in the company. Any company that does not pay dividends in the current period, this action of the company means that it reinvests the profits in the company to create benefits and thus increase the company's ability to pay dividends in the future. According to the hypothesis of information content or signaling, the start of paying dividends by a company or a significant increase in dividends by the company can have different messages from the perspective of different shareholders. Paying a low dividend reduces investors' uncertainty about receiving their capital returns, and as mentioned in the signaling hypothesis, the increase in dividends from the perspective of investors is a sign of the future profitability of the company and is interpreted as a good news that the company's future horizon is clear from the management's point of view. On the other hand, some investors may see the increase in dividends as a sign of the lack of investment opportunities and growth and development, or the company's failure to use these opportunities, and as a result, the increase in dividends is not a positive sign from their point of view. This group will probably sell the shares of these companies. In other words, the type of decision of the company to distribute the profit or not to distribute it can be effective in the volume of the company's stock transactions and the structure of its shareholders. There is another possibility, and that is that investors are indifferent to dividends and do not react to them, especially considering the cost of transactions. And it has been proposed as a test of the dividend notification hypothesis. Regarding the empirical validity of the dividend signaling hypothesis, there is a type of collective disagreement. In such a way that a group of researchers believe in the existence of a positive and important relationship between dividend changes and future profits, while another group believes that there is no relationship. Over many years, various researchers have investigated the signaling hypothesis, which indicates the existence of a relationship between the announcement and payment of dividends and the prediction of future profits, taking into account various variables such as the predictability of cash flows [3], the ratio of market value to book value [4], and past returns [5]. It has attracted many. One of the issues raised in the conceptual statement of the Financial Accounting Standards Board as the underlying goals of financial reporting is the ability to predict profits with respect to future cash flows. The ratio of market value to book value, a variable that is widely used in accounting and financial sciences in order to record the market's understanding of future growth opportunities, also affects the dividend signaling hypothesis. used also has an effect on the hypothesis of dividend marking

  • Contents & References of An analysis of the factors related to changes in dividends and changes in future profits in Iran's capital market

    List:

     

    Abstract: 1

    Introduction: 2

    Chapter One: Research Elements

    1-1 Introduction 5

    2-1 Statement of the problem: 6

    3-1 Importance and necessity of the research topic: 8

    4-1 Research objectives. 9

    5-1 theoretical framework of the research. 10

    6-1 Research model and method of measuring variables 13

    7-1 Research hypotheses: 15

    8-1 Definition of words and terms. 16

    Chapter Two: A review of research literature

    1-2- Introduction 19

    2-2 The concept of profit at the structure level. 21

    1-2-2 transactional approach in profit measurement 21

    2-2-2 activity approach in profit measurement 22

    3-2 Concepts of profit at the meaning level (relation to economic realities) 22

    1-3-2 profit as a measure of efficiency. 22

    2-3-2 Accounting profit compared to economic profit. 23

    4-2 Concepts of profit at the operational level (how it is used by users) 25

    1-4-2 Profit as a means of forecasting. 25

    2-4-2 capital market approach 26

    5-2 The concept of comprehensive profit in financial reports. 27

    6-2 Accounting profit. 27

    2-7 Profit and its importance as a forecasting tool. 27

    2-8 profit and share price communication links 28

    1-8-2 connection between future accounting profit and current accounting profit. 28

    9-2 Forecasting future profits from current profits. 29

    10-2 The relationship between profit and stock price 29

    29-11 Net profit as a factor for forecasting cash 30

    12-2 Providing information about cash flow and its forecast. 31

    2-13 forecasting future cash flows 32

    2-14-2 criteria for evaluating the financial performance of companies 34

    2-14-2 economic criteria for evaluating the performance of companies 39

    2-15 dividend (DPS. 40

    2-16 research background. 71

    Chapter three: research implementation method

    3-2 Research method

    3-4 Sample and sampling method

    3-7 Information collection

    8-3 data analysis method

    1-8-3 simple linear regression analysis

    9-3 data analysis method

    4th chapter: data analysis

    1-4

    2-4 Descriptive indices of variables 100 3-4 Research hypothesis analysis 104 4-1 Checking the assumption of normality 4-2 The summary of analyzes is described as follows: 105

    1-2-4-4 analysis and test of the first main hypothesis: 105

    2-2-4-4 analysis and test of the second main hypothesis 108

    3-2-4-4 analysis and test of the third main hypothesis 112

    -2-4-4 analysis and test of the hypothesis of three main variables. 168

    -2-4-4 Analysis and hypothesis testing of three main variables and three auxiliary variables. 169

    Chapter Five: Conclusions and Suggestions

    1-5-Introduction: 176

    2-5-Research Summary. 176

    5-3 results of hypothesis testing 177

    1-3-5 results of the first main hypothesis. 177

    1-1-3-5 Results of sub-hypothesis 1-1-1. 178

    2-1-3-5 Results of sub-hypothesis 2-1-1. 178

    3-1-3-5 Results of sub-hypothesis 1-2-1. 179

    4-1-3-5 Results of sub-hypothesis 2-2-1. 179

    5-1-3-5 Results of sub-hypothesis 1-3-1. 180

    6-1-3-5 Results of sub-hypothesis 2-3-1. 180

    2-3-5 The results of the second main hypothesis 180

    1-2-3-5 The results of the secondary hypothesis 1-1-2. 181

    2-2-3-5 Results of sub-hypothesis 2-1-2. 181

    3-2-3-5 Results of sub-hypothesis 1-2-2. 182

    4-2-3-5 Results of sub-hypothesis 2-2-2. 182

    5-2-3-5 Results of sub-hypothesis 1-3-2. 183

    6-2-3-5 Results of sub-hypothesis 2-3-2. 183

    3-3-5 The results of the third main hypothesis 183

    1-3-3-5 The results of the secondary hypothesis 1-1-3. 184

    2-3-3-5 Results of sub-hypothesis 2-1-3. 184

    3-3-3-5 Results of sub-hypothesis 1-2-3. 185

    4-3-3-5 Results of sub-hypothesis 2-2-3. 185

    5-3-3-5 Results of sub-hypothesis 1-3-3. 186

    6-3-3-5 Results of sub-hypothesis 2-3-3. 186

    4-3-5 Results of three main variables and dependent variables 187

    5-3-5 Results of three main variables. 186

    4-3-5 Results of three main variables and dependent variable 187

    5-3-5 Results of three main variables and three virtual variables with dependent variable 187

    4-5 General conclusion of the research. 188

    5-5 suggestions 189

    1-5-5 suggestions based on the findings of research hypotheses. 189

    2-5-5 other suggestions 191

    3-5-5 suggestions for future research. 191

    6-5 research limitations. 192

    Appendices

    Appendix A related to the names of statistical sample companies. 195

    Sources and reference

    Persian sources: 201

    Latin sources: 205

    Internet sources 206

    Source:

    Persian sources:

    Azer, Adel and Mansour Momeni, 1380. "Statistics and its application in management", Semit Publications, volume 1, sixth edition, Tehran, p. 6.

    Azer, Adel and Mansoormomeni, 1385, "Statistics and its application in management", Semit Publications, volume 2, ninth edition, Tehran, pp. 212-183.

    Islami Bidgoli, Gholamreza, 1370, "Review of theories, policies and division policy Profit (1)", Management Knowledge Quarterly, No. 14-29.

    Etamidi, Hossein and Pari Chalaki, 1384, "The relationship between performance and distribution of cash dividends in companies listed on the Tehran Stock Exchange during the years 1377-381", Journal of Accounting and Auditing, Year 12, No. 39, Tehran, pp. 31-47.

    Amani, Korosh, 1376, "Investigation of the relationship between dividends and stock prices of companies listed on the Tehran Stock Exchange", Master's thesis in accounting, University of Tehran.

    Bakhtiari, Mahmoud, 1382, "Investigation and comparison of the effect of profit per share, dividend per share and the growth rate of company profits on stock prices in the Tehran Stock Exchange", Master's thesis in financial management, Imam Sadegh University, Faculty of Education and Management.

    Borhani, Seyyed Mohammad, 1387, "Usefulness of dividend information on predicting future profits", master's thesis in accounting, Allameh Tabatabai University.

    Bahram Far, Naqi and Kaveh Mehrani, 1383, "Relationship between dividend per share, dividend and investment in companies listed on the Tehran Stock Exchange", Journal of Accounting and Auditing, Year 11-Number 36, pp. 27-46.

    Taghi Puriani Gilani, Youssef, 2014, "Evaluation of the role of profit per share and dividend per share on the share price of companies listed on the Tehran Stock Exchange", master's thesis in accounting, Islamic Azad University of Tehran Research Sciences Unit.

    Tehrani, Reza, 2018, "Financial Management", Negah Danesh Publishing House, Tehran, p. 351.

    Jehankhani, Ali and Asghar Sajadi 1374, "The application of the concept of economic added value in financial decisions", Financial Research, second year, numbers 5 and 6, pp. 68-86).

    Hafez Niya, Mohammad Reza, 1382, "An introduction to research methods in human sciences", Samt Publications, 8th edition, pp. 45-44.

    Khadim Shahreza, Alireza, 1380, "Investigation of the relationship between dividend policies and changes in stock prices in the company Accepted in the Tehran Stock Exchange" Master's Thesis in Accounting, Tarbiat Modares University, Tehran, p. 67. Khaki, Gholamreza, 2017, "Research method with an approach to thesis writing", Rekasal Publications, 4th edition, p. 303-305.

    Khajavi, Shikraleh and Hamid Elhiari Abhari, 2017, "Investigating the information content of dividends, book value and net profit on Stock prices of companies listed on the Tehran Stock Exchange", Financial Research, No. 22, pp. 3-20.

    Khorshidi, M. and Hamid Qureshi, 1381, "Advanced Investment Management", Aaghah Publishing House, second edition, p. 254.

    Khosh Taynet, Mohsen and Najmeh Hajian, 1387, "The Effect of Dividend Increase on Investors' Behavior", Journal of Accounting and Auditing Reviews, year 15-Number 51, pp. 3-18.

    Delavar, Ali, 1388, "Theoretical and scientific foundations of research in human and social sciences", Rushd Publications, fourth edition, Tehran, p. 122.

    Devani, G., 1384, "Stock market, stocks and how to price stocks", first publication, fourth edition, p. 153.

    Raymond P. Novo, 1388, "Financial Management", translated by Ali Jahankhani and Ali Parsaiyan, Semat Publications, 15th edition, Tehran.

    Sarbanha, Mohammad Reza, 1382, "Effect of Dividends on the Stock Prices of Companies", Doctoral Dissertation of Accounting, Allameh Tabatabai University.

    Sarmad, Z.  et al., 1381, "Research Methodology in Behavioral Sciences", Tehran, Aghagh Publication.

    Siah Raziani, Mohsen, 1388, "Investigating the relationship between profit quality and cash profit distribution in companies listed on the Tehran Stock Exchange", Master's Thesis, Islamic Azad University, Maroodasht Branch

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