Investigating the relationship between information asymmetry and ownership concentration with profit management in companies listed on the Tehran Stock Exchange

Dissertation for Master's Degree

Direction: Accounting

Abstract:

It is generally believed that the presence of institutional investors may lead to a change in the behavior of companies. The influence of institutional investors on management decisions regarding financial decisions has been proven in previous researches. The purpose of this research is to examine the relationship between information asymmetry and ownership concentration with profit management in companies listed on the Tehran Stock Exchange. The time period under study is between 2013 and 2018. Using the new Ravard software, the data have been collected and calculated with the help of EXCEL software. SPSS software was used to test the hypotheses and perform other analyzes by using statistical methods such as descriptive statistics, correlation (correlation coefficient, coefficient of determination), regression analysis and testing its coefficients, correlation analysis and testing its coefficients, and testing the significance of several correlation coefficients. A total of 109 active stock companies were considered as a selected sample. In the first hypothesis of the research, it is predicted that there is a significant relationship between ownership concentration and information asymmetry. The research results show a direct and significant relationship between this variable and the level of information asymmetry. In other words, with the increase in ownership concentration during the research period, information asymmetry has increased in statistical sample companies. In the second research hypothesis, it is predicted that there is a significant relationship between profit management with information asymmetry and ownership concentration. The results of the research confirm the second hypothesis. According to the obtained results, investors and analysts are recommended to make short-term and long-term investment decisions, in addition to using the figures provided by companies and the capital market, to pay attention to factors such as the composition of ownership and the level of information asymmetry of companies.

Key words: information asymmetry, ownership concentration, profit management

Introduction:

The composition of shareholders of different companies is different. A part of the ownership of the companies is in the hands of individual shareholders and natural persons, another part of the shares is in the hands of managers and a part is in the hands of major shareholders who are known as institutional shareholders. Institutional investors are big investors such as banks, insurance companies and investment companies. It is generally believed that the presence of institutional investors may lead to a change in the behavior of companies. The influence of institutional investors on management decisions regarding financial decisions has been proven in previous research. Since in developing countries such as Iran, the role of shareholders is significant in economic prosperity, it is important to pay attention to this group of investors. By encouraging this group to invest more, Tabtuan helped to improve the economic situation of the society through attracting their capital. The purpose of this research is to examine the relationship between information asymmetry and ownership concentration with profit management in companies listed on the Tehran Stock Exchange. 1 Introduction The composition of shareholders of different companies is different. Part of the ownership of the companies is in the hands of individual shareholders and natural persons. Another part of the shares is in the hands of the managers and another part is in the hands of the major shareholders who are known as institutional shareholders [1].  Institutional investors are big investors such as banks, insurance companies and investment companies (Norush, 2014; p. 56).[2] It is generally believed that the presence of institutional investors may lead to a change in the behavior of companies. The influence of institutional investors on management decisions regarding financial decisions has been proven in previous research. These effects may be due to the concentration of ownership and its obvious and objective consequence, that is, the concentration of governance and control of the behavior and decisions of company managers by major shareholders (Mag and Larg, 1998; pp. 8-9)[3].

In this research, the relationship between information asymmetry [4] and ownership concentration [5] with profit management [6] in companies listed on the Tehran Stock Exchange has been investigated. In this chapter, an overview of the research is presented. First, the question of research is raised and the necessity of doing it is explained.Then, according to the problem and research questions, hypotheses are formulated and presented. In the following, the research method is explained in general, this part includes the method of sample selection and hypothesis testing pattern, and at the end, the specialized terms of the research are operationally defined and explained. Ownership of joint-stock companies

Foreign research

Jaish Kumar, 2004, in the study he conducted in India, after investigating the impact of the type of ownership structure on the value of companies, concluded that managers had the greatest impact on company performance, and foreign shareholders and holding companies do not significantly influence company performance.

Anlin Chen et al., 2005, in a study he conducted on 133 active companies on the stock exchange in Taiwan, focusing on the structure of managerial ownership between 1995 and 1999, found that firstly, the relationship between the type of legal ownership and the performance of companies' stock returns is a meaningful and positive relationship, secondly, the presence of directors and board of directors in the combination of ownership has a reducing effect on the performance of the stock market, and this is in conflict It is with agency theory.

Arin Chappell, 2004, showed that about two-thirds of active companies in the Belgian stock market mainly have a concentrated ownership structure, because one of the ways to increase control over companies is ownership concentration. In addition, most of the listed companies in Belgium tend to combine major ownership where their major shareholders have voting rights for at least 50 percent of the company's shares. Chappell has pointed out the main reason for this finding is that the major shareholders in Belgium have a high control power, because in this country the members of the board of directors mainly act in favor of the interests of managers and shareholders. Even if their control and management is against the law, because they consider the interests of the major shareholders as the best option to advance the law.

In another study conducted in Korea, Bernard Block , 2002, sought to answer the question "Can corporate governance be a measure to predict company value?" In this study, a corporate governance index for each company and the entire Korean stock exchange is defined from 0 to 100. This index is defined based on five important components of corporate governance, which include shareholders' rights, board of directors' structure, board of directors' procedures, transparency and equality of ownership. The results of the research indicate that companies whose governance system is efficient and have higher governance indicators have better performance (lower capital costs and sales costs), but they are not necessarily expected to be more profitable in the future, as well as value There are more investors in these companies and shareholders receive similar profits. Other results of the research in detail include that companies with half of their directors are non-compulsory, have more value, small companies have lower governance indicators than large companies due to the smaller volume of transactions. effect of attitude and behavior on IT acceptance in organizations, but yielded ambiguous results. Possibly they have not effectively accounted for the moderating effects of experience gained through direct interaction with the target technology. We examined the moderating effect of the length of direct experience on IT acceptance relationships and constructs. Using multi-group invariance analysis, we demonstrated that relationships between key IT acceptance constructs differed, depending on the user's experience. The incorporation of direct experience can lead to convergent results and contribute to further understanding of the process. We discuss some implications from the knowledge that IT use is a dynamic process and suggest that IT management must account for direct experience in their decision making.