Investigating the performance of listed companies before and after the implementation of the first phase of targeting subsidies

Dissertation for Master's Degree in Industrial Management, Financial Orientation

Abstract

After the Islamic Revolution and 8 years of holy defense, the economic situation was such that the government decided to pay subsidies to energy carriers in order to help the vulnerable and grow. In the following years, due to the sufficient economic growth and strengthening of the country's economy, in order to reduce government expenses, in 2018, the first phase of reducing the subsidies paid by Mr. Ahmadinejad's government was implemented. This reduction of the subsidy paid by the government was done in a targeted way, taking into account the vulnerable sections of the society. But the increase in production costs in economic conditions caused the possibility of financial weakening and reduced profitability of manufacturing companies. Now, after 5 years, it is time to evaluate this performance and determine its results for the companies and determine the necessary guidelines for the implementation of the second phase. In order to evaluate, we have used companies active in the Tehran Stock Exchange as representatives of the country's industry. We obtained the appropriate financial indicators for the research from the World Stock Exchange Organization and confirmed their accuracy by using the confirmatory factor analysis technique to evaluate the financial performance, and we compared the average financial indicators of 3 years before and after the implementation of the first phase of the targeting of subsidies using a paired test. The result was that the targeting of subsidies had no effect on the financial performance of listed companies. The results of this research can be used to implement the second phase of targeting subsidies and for more correct implementation. Keywords: Targeting subsidies, subsidy, performance evaluation, financial performance evaluation, Tehran Stock Exchange, industry, economic indicators, subsidy, accounting indicators Introduction Implementation of the plan to target subsidies and price correction Energy carriers have a high sensitivity in the country's economy due to their impact on macroeconomic variables, private sector consumption and production of industry sub-sectors. The increase in the price of energy carriers has long been the subject of controversy in Iran's economy, and considering the importance of the issue and its impact on the economy and society's well-being, more and more comprehensive studies and reviews in this area seem necessary. The pricing of energy carriers in Iran's economy is done by the government and has always been lower than the world prices. It seems that the continuation of this method is difficult and costly for Iran's economy, and for this reason, the government and policy-making institutions are trying to reform this method of pricing energy carriers. In line with the predetermined goals of (spreading justice), (reducing inflation) and (making Iran's economy more competitive), the government implemented the program (removal of subsidies) at the end of 2019 to compensate for the increase in household expenses. He pays them a monthly amount (Akbari and Mozen Jamshidi, 1390).

For the first time after the victory of the Islamic Revolution, the issue of changing basic quotas was discussed in Section 4 of the General Policies of the First Development Program Law (approved in 1368). In such a way that the subsidies paid in the framework of the country's social security system were gradually directed only to the low-income people of the society. The Law of the Second Development Program (approved 1373) emphasized the issue of continuing the policy of paying subsidies for basic goods and medicine and even making public part of the hidden subsidies as much as possible and at the same time strengthening the social system, relief insurance and establishing and providing direct aid in necessary cases. Also, in the law of the third development plan (paragraph a of article 46), the government was obliged to take legal measures in order to target the payment of subsidies for basic goods and energy carriers and other cases. In addition to this chapter, the eighth chapter of the fourth development plan law (approved in 1373) is devoted to the issue of human and social security promotion (Article 95 of the fourth development plan law). In this article, the government is obliged to revise the regulations and prepare the necessary bills for this purpose. Regarding gasoline and diesel, according to Article 1 of the Law on the Development of Public Transportation and Fuel Consumption Management (approved in 2016), the government is obliged to remove gasoline and diesel from the support basket. Paragraph 16 of the general policies of the system in the perspective period also refers to the transformation of the government's subsidy payment system and transfer payments and the clarification of hidden subsidies in the country's economy along with compensatory policies and the strengthening of comprehensive social security systems and support for disadvantaged groups..

The distribution of subsidies in recent decades, with the aim of keeping the general level of prices low and increasing the welfare of consumers, had prevented the necessary mobility and dynamism in the economy, in such a way that the huge amount of government support (allocation of subsidies, about 26% of the GDP) had faced the government with many problems and the GDP has not grown much in three decades. These reasons doubled the necessity of implementing the subsidy targeting plan (Alizadeh, 2019).

Targeting is defined in the Majlis Research Center as follows: "Targeting is based on the assumption that a part of the society has a higher priority to receive transitional aid, and since resources are limited, priorities must be observed in the distribution of these aids. The purpose of targeting is to determine those who are eligible to receive transitional aid. are, in such a way that the welfare resulting from transfer payments is available to the poor. Therefore, the selection and determination of eligible people and target groups is a necessary condition for targeting. Also, the target community means the individuals and households or groups that are supported in the framework of the targeting of subsidies (Parliament Research Center, 2018). prices) and the other (targeted distribution of subsidies). The focus of the first part, which is about the liberalization of prices, is focused on the government subsidy in the sector of energy carriers. The focus of the second part is the discussion of the targeted distribution of subsidies, the discussion of the target society and the people who lose all or part of their income due to the implementation of these economic policies. are placed, it was noticed by the government (Alizadeh, 2009).

According to the stated content, let's see the effects of targeting subsidies in the financial statements of companies. Now that 3 years have passed since the implementation of the first phase of targeting subsidies, it is time to answer the question of evaluating the impact of targeting subsidies on the progress of industries. Also, to evaluate the impact of this law on their financial performance and efficiency. For this purpose, we have gone to listed companies as representatives of companies active in the country's industries and have measured their performance indicators before and after the targeting of subsidies.

      As can be seen from Barnard's words, the purpose of forming production and commercial organizations is to obtain monetary benefits. On the other hand, the increase in the price of energy inputs has directly increased the cost of domestic producers. In other words, it has threatened the money that Barnard is considering. Zamanzadeh believes that: "The increase in the price of energy inputs has directly increased the cost of domestic producers (of course, in proportion to the amount of energy in different industries). On the other hand, due to the price control of many industrial products by the government, the income of manufacturing companies has not increased in proportion to the costs. This sudden increase in costs has affected the profit margin of companies in the short term and may result in the loss of many (Zamanzadeh, 2013)

In the report published by the Research Center of the Islamic Council, it is stated as follows: "The most impact of the liberalization of energy prices in the industrial sector is related to the types of energy-intensive industries, which includes a large part of the energy-intensive industries. In this sector, due to the high level of energy consumption, a number of industries have suffered many problems. "(Dehghani and Maqsoudi, 2013)

For example, mining industries active in the country, due to their share in the consumption of various types of energy carriers, are considered one of the most important and effective sectors in the amount of energy demand and consumption, and accordingly, after the approval and implementation of the law on the targeting of subsidies and the liberalization of energy prices in the country, they are considered to be one of the most effective sectors of this matter. Same, 1390)

On the other hand, the liberalization of prices has led to an increase in the cost of raw materials and salaries. (Dehghani and Maqsoodi, 2013) According to the above, the problem of profitability, although in the short term, can be seen in the energy industry after the implementation of the first phase of the targeting of subsidies.