Investigating the effect of non-payment risk on profit reaction coefficient

Dissertation for Master's degree

Orientation: Accounting

Abstract:

Accounting information is useful and beneficial for investors to estimate the expected value and risk of bond returns. Information is only useful if it changes the opinions and behaviors of investors, in addition, the amount and degree of usefulness can be measured by the extent and size of changes in volume and price following the release of information. One of the information that investors, analysts and creditors attach great importance to is the information that shows the financial strength of the business unit and the relative confidence in the continuation of the company's activity. One of the factors that makes this relative certainty ambiguous is the risk of non-payment and the possibility of bankruptcy of the business unit. In this research, a concept called the profit reaction coefficient as the ratio of unexpected profits to the abnormal returns of companies was investigated as a criterion for the rational decisions of investors and other financial users, and the effect of non-payment risk as a measure of the financial strength of companies on this profit reaction coefficient was investigated. The research period of 4 years and from 1384 to 1387 was selected and tested with SPSS software and analyzed with the help of descriptive and inferential statistics such as correlation analysis. The results obtained in this research indicate the negative impact of non-payment risk on the profit reaction coefficient.

Introduction:

In today's investment world, decision making is perhaps the most important part of the investment process, during which investors need to make the most optimal decisions in order to maximize their benefits and wealth. In this connection, the most important factor in the decision-making process is information. Information can have a significant impact on the decision-making process. Because it causes different people to make different decisions. In the stock market, investment decisions are also influenced by information. Securities market theorists consider financial reporting as the most important source of information for investors. For this reason, one of the purposes of accounting and preparing financial statements is to provide information in order to facilitate decision-making.

Although different people and groups have different motives for preparing and presenting information, however, if the information is bad news, there will be a necessary justification for hiding and not disclosing it. Hiding and hiding information causes the specific value of information to increase. Emphasizing the claim that there are many losers and few winners in the market, it is possible to understand the main reason for the actions of market players to reduce the secrecy and concealment of information, actions that become meaningful through the creation of demand for public dissemination of information and are an effective tool to reduce the distribution of investors' risks in the market. Among the good and bad news in the market, we can mention the news related to the financial situation, liquidity, risk and profit forecasts. Therefore, in order to understand and explain the causes of different market reactions to profit information, a concept called the profit reaction coefficient [1] was proposed.

During various researches, the relationship between the profit reaction coefficient and the financial variables of companies has been examined and evaluated. Therefore, the main approach in this research is the experimental test of the usefulness of profit information content through the test of the impact of unexpected profits on unexpected returns with the impact of the risk of non-payment. 1-1 Introduction 1-1 Introduction style="direction: rtl;">Financial reporting is one of the most important products of the accounting system, one of its main goals is to provide the necessary information for the economic decision-making of users regarding the evaluation of the performance and profitability of the economic enterprise.The necessary condition to achieve this goal is to measure and provide information in a way that makes it possible to evaluate the past performance and is effective in measuring the profitability and predicting the future activities of the economic enterprise. One of the accounting items that is prepared and presented in financial reports is net profit, which has different uses. Usually, profit is considered as a factor for formulating dividend policies and guidance for investment and finally a factor for forecasting.

Managers, analysts and investors pay the most attention to the reported profit of companies. Managers benefit from maintaining the growing trend of profits, because their remuneration depends on the amount of profits of the companies. Financial analysts are involved in the business of processing and interpreting information, and correctly understanding the informational content of profits is an essential part of this practice. The release of good news about corporate profits and generally about the state of companies significantly affects stock prices, and it is unlikely that the market's sensitivity and obsession with profit-based performance evaluation will decrease. Accounting is useful and beneficial for investors in order to estimate the expected value and the risk of securities returns.

If accounting information did not have content and information [1], there would be no revision of the forecasts as a result of receiving them, and it would not cause buying and selling decisions, and without buying and selling decisions, there would be no change in the volume of transactions and prices. Information is useful that causes changes in the opinions and behaviors of investors.

In addition, the amount and degree of usefulness of information can be measured by the extent and size of changes in volume or price following the release of information. This equivalence of the usefulness of information content is called the information perspective of decision usefulness. The view of this perspective is that investors want to predict future stock returns themselves (rather than having accountants do it for them based on ideal conditions), and from this perspective, investors greedily swallow all useful information. As mentioned, most empirical researches have indicated the usefulness of at least some accounting information. In addition, the information approach states that empirical research can be a guide for accountants to determine useful information (through determining the market reaction rate).

Information view, decision usefulness is a financial reporting approach that considers individual responsibility for predicting the company's operational future and focusing on providing useful information for this purpose. This approach assumes that an efficient stock market reacts to any useful information from any information source, including financial statements. Of course, we have to be careful when we equate the utility with the extent and size of bond price changes. It is better for accountants to base their decisions on the content of financial statements based on the market's reaction to it. But this issue does not necessarily mean that the society is better for him. Information is a very complex commodity and its private and public (social) values ??are not the same. One of the reasons is the cost of information. Because users of financial statements do not pay for it directly. Therefore, they may find information useful, which instead of increasing the utility of the society, imposes a higher cost on the society. Then we define the topic of the research and continue to express the importance and necessity of the research. We also express the research objectives in the form of general and special objectives. The theoretical framework of the research, which was the main basis of the research question and topic, is presented in this chapter, and the research hypotheses and analytical model are also mentioned in the following. It is a time during which investors need to make optimal decisions in order to maximize their benefits and wealth. In this connection, the most important factor in the decision-making process is information.