The Relationship Between the Financial Information Availability to Performance and CEO Change After Mandatory Amendment of Information Disclosure of listed Companies

Document Type : Research Paper

Authors

1 Assistant Professor of Accounting Department of Payame Noor University, Tehran, Iran

2 Budget Manager/University of jiroft

Abstract

The existence of transparent information is an essential element of accountability and informed economic decision-making. Disclosure of information by companies is one of the most important and valuable sources of information for investors, creditors and other stakeholders. Legal mechanisms, guidelines, or accounting standards define disclosure cases and require companies to comply with them. The executive instruction on the disclosure of information by listed companies in stock exchange in the implementation of paragraphs 11 and 18 of Article 7 and Article 45 of the Law on the Securities Market of the Islamic Republic of Iran was adopted in 1391. The main purpose of this research is to investigate the relationship between the availability of financial information and the performance and change of CEO after the adoption of this instruction. The research hypotheses were analyzed by a statistical sample of 140 firms approved during the years 2009 to 2017 based on linear regression and Logit method. The research findings indicate that after the approval of the disclosure directive, the relationship between firm performance and availability of information has decreased, but the relationship between company performance fluctuations and availability of information has increased. The research findings showed that after the adoption of the disclosure directive, the relationship between the company's performance fluctuations and CEO change has increased, but there was no significant relationship between corporate performance and CEO change.

Keywords

References

Armstrong, C. S. , Guay, W. R. , & Weber, J. P. (2010). The role of information and financial reporting in corporate governance and debt contracting. Journal of Accounting and Economics, 50 (2-3) , 179-234.
Bhojraj, S. , Hribar, P. , Picconi, M. , & McInnis, J. (2009). Making sense of cents: An examination of firms that marginally miss or beat analyst forecasts. The Journal of Finance, 64 (5) , 2361-2388.
Bushman, R. , Dai, Z. , & Wang, X. (2010). Risk and CEO turnover. Journal of Financial Economics, 96 (3) , 381-398.
Cohen, D. A. , Dey, A. , & Lys, T. Z. (2013). Corporate governance reform and executive incentives: Implications for investments and risk taking. Contemporary Accounting Research, 30 (4) , 1296-1332.
Durnev, A. , & Mangen, C. (2009). Corporate investments: Learning from restatements. Journal of Accounting Research, 47 (3) , 679-720.
Bini, L. , Giunta, F. , & Dainelli, F. (2010). Signalling Theory and Voluntary Disclosure to the Financial Market-Evidence from the Profitability Indicators Published in the Annual Report. Available at SSRN 1930177.
Eugster, F. , & Wagner, A. F. (2011). When and how is voluntary disclosure quality reflected in equity prices?. Swiss Finance Institute Research Paper, (11-15).
Fu, R. , Kraft, A. , & Zhang, H. (2012). Financial reporting frequency, information asymmetry, and the cost of equity. Journal of Accounting and Economics, 54 (2-3) , 132-149.
Foroghi, D. , & Alidadi, S. J. (2017). The Influence of The Interlocked Board of Directors on Voluntary Disclosure and Earning Quality.
Fu, R. , Gao, F. , Kim, Y. H. , & Qiu, B. (2017). Performance volatility, information availability, and disclosure reforms. Journal of Banking & Finance, 75, 35-52.
Guthrie, K. , Sokolowsky, J. , & Wan, K. M. (2012). CEO compensation and board structure revisited. The Journal of Finance, 67 (3) , 1149-1168.
Hermalin, B. E. , & Weisbach, M. S. (2012). Information disclosure and corporate governance. The journal of finance, 67 (1) , 195-233.
Heydari, A. , Ariyan, A. (2015). Investigating the effect of managing change on profit management. Second International Conference on Accounting, Business Management and Innovation, Rasht, California Lutheran University, Rasht Municipality. (In Persian).
Hölmstrom, B. (1979). Moral hazard and observability. The Bell journal of economics, 74-91.
Jenter, D. , & Kanaan, F. (2015). CEO turnover and relative performance evaluation. The Journal of Finance, 70 (5) , 2155-2184.
Jin, J. Y. , Kanagaretnam, K. , & Lobo, G. J. (2013). Unintended consequences of the increased asset threshold for FDICIA internal controls: Evidence from US private banks. Journal of Banking & Finance, 37 (12) , 4879-4892.
Klock, M. S. , Mansi, S. A. , & Maxwell, W. F. (2005). Does corporate governance matter to bondholders? Journal of Financial and Quantitative Analysis, 40 (4) , 693-719.
Kurdestani, GH. , Abdollahi, A. (2013). Investigating the impact of customer focus on corporate financial performance. Asset and Finance Management, 2 (3) , 81-92. (In Persian).
Li, F. , & Srinivasan, S. (2011). Corporate governance when founders are directors. Journal of Financial Economics, 102 (2) , 454-469.
Minnis, M. (2011). The value of financial statement verification in debt financing: Evidence from private US firms. Journal of accounting research, 49 (2) , 457-506.
Morck, R. , Yeung, B. , & Yu, W. (2000). The information content of stock markets: why do emerging markets have synchronous stock price movements? Journal of financial economics, 58 (1-2) , 215-260.
Musavi, Z. , Moridipour, H. , Jari, A. (2012). Investigating the evaluation of the effect of corporate mobility supervision mechanism on the performance of companies accepted in the market of Tehran stock exchange. Journal of Financial Accounting, 2 (6) , 141-155. (In Persian).
Nazemi, A. , Momtazian, A. , Behpour, S. (2014). Examining the relationship between the quality of disclosure of financial information and stock returns. Accounting Advances, 7 (2) , 219-244. (In Persian).
Nagar, V. (1999). The role of the manager's human capital in discretionary disclosure. Journal of Accounting Research, 37, 167-181.
Nasirzadeh, F. , Mousavi, A. (2016). Investigating the market reaction to disclosure of significant information, Accounting Knowledge, 8 (3) , 80-53. (In Persian).
Nikbakht, M. R. , Azadi, K. , Aminpour, A. , Gholami, F. (2016). Investigating the effect of delay in profit statement on the relationship between optional disclosures and the cost of ownership capital. Management System, 6 (1) , 127-152. (In Persian).
Roberts, M. R. , & Whited, T. M. (2013). Endogeneity in empirical corporate finance1. In Handbook of the Economics of Finance (Vol. 2, pp. 493-572). Elsevier.

Files

History

  • Receive Date: 04 February 2019
  • Revise Date: 08 June 2019
  • Accept Date: 15 May 2019

Share

How to cite

Statistics