Quality of Financial Reporting, Family Ownership, and Investment Performance in Companies Listed in Tehran Stock Exchange

Document Type : Research Paper

Author

PhD student of Accounting, Mobarakeh Branch, Isfahan, Iran

Abstract

The agency theory considers higher financial reporting quality as a solution to reduce the challenge of low and high investment by reducing asymmetric information. In the case of investment efficiency, the economic implications of financial reporting quality in family and non-family ownership differ. This study examines the relationship between family ownership and the quality of financial reporting on investment performance during the period of 1396-1392 for listed companies in Tehran Stock Exchange. Research models were assessed based on ordinary least squares method and multiple regression.  The study emphasizes both agency and behavioral theories. The results show that firms with higher financial reporting quality and family ownership, have higher investment efficiency. In addition, the quality of financial reporting and higher family ownership reduce investment. The impact of the quality of financial reporting on investment efficiency is stronger for family-owned businesses.

Keywords


Achleitner, A. K. , Günther, N. , Kaserer, C. , & Siciliano, G. (2014). Real Earnings Management and Accrual-Based Earnings Management in Family Firms. European Accounting Review, 23 (3) , 431-461.
Ali, A. , Chen, T. Y. , & Radhakrishnan, S. (2007). Corporate Disclosures by Family Firms. Journal of Accounting and Economics, 44 (1-2) , 238-286.
Ali. Mohammad Ali, Hasan Zadeh, Bozrou, (2019) , Accounting for Sustainability and Its Effects on Investment Performance, Journal of Accounting, 33 (4). 34-7
Anderson, R. C. , & Reeb, D. M. (2003). Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500. The Journal of Finance, 58 (3) , 1301-1328.
Anderson,، R. C.، Duru,، A. And Reeb,، D. M. ((2012) ,، “Investment Policy in Family Owned Firms، Journal of André, 4 (9). 34-56.
André, P. , Filip, A. , & Marmousez, S. (2014). The Impact of IFRS on the Relationship between Conservatism and Investment Efficiency. Comptabilité-Contrôle-Audit, 20 (3) , 101-124.
Asaba, S. (2013). Patient investment of family firms in the Japanese electric machinery industry. Asia Pacific Journal of Management, 30 (3) , 697-715.
 Attig, N. , Boubakri, N. , El Ghoul, S. , & Guedhami, O. (2016). The global financial crisis, family control, and dividend policy. Financial Management, 45 (2) , 291-313.
Audretsch, D. B. , Hülsbeck, M. , & Lehmann, E. E. (2013). Families as Active Monitors of Firm Performance. Journal of Family Business Strategy, 4 (2) , 118-130.
Badawar, Yunisia, Nahandi, Reza (2014). Any Effects of Brokerage on Unprofitable Investment in Debt Securities. Dynamic Communities and Formal Spaces. 21 (34). 56-78.
Beatty, A. , Liao, S. , & Weber, J. (2009). The Effect of Private Information and Monitoring On the Role of Accounting Quality in Investment Decisions. Joseph Peter, The Effect Of Private Information And Monitoring On The Role Of Accounting Quality In Investment Decisions. 4 (1). 45-67.
Bertrand, M. , & Mullainathan, S. (2003). Enjoying the Quiet Life? Corporate Governance and Managerial Preferences. Journal of Political Economy, 111 (5) , 1043-1075.
Biddle, G. C. , & Hilary, G. (2006). Accounting Quality and Firm‐Level Capital Investment. The Accounting Review, 81 (5) , 963-982.
Biddle, G. C. , Hilary, G. , & Verdi, R. S. (2009). How Does Financial Reporting Quality Relate to Investment Efficiency? Journal of Accounting and Economics, 48 (2-3) , 112-131.
Chen, S. , Chen, X. I. A. , & Cheng, Q. (2008). Do Family Firms Provide More or Less Voluntary Disclosure? Journal of Accounting Research, 46 (3) , 499-536.
Chen, X. , Sun, Y. , & Xu, X. (2016). Free Cash Flow, Over-Investment and Corporate Governance in China. Pacific-Basin Finance Journal, 37, 81-103.
Chung, H. H. , Wynn, J. P. , & Yi, H. (2013). Litigation Risk, Accounting Quality, and Investment Efficiency. Advances in Accounting, 29 (2) , 180-185.
Claessens, S. , Djankov, S. , & Lang, L. H. (2000). The Separation of Ownership and Control in East Asian Corporations. Journal of Financial Economics, 58 (1-2) , 81-112.
Craig, J. , & Dibrell, C. (2006). The Natural Environment, Innovation, and Firm Performance: A Comparative Study. Family Business Review, 19 (4) , 275-288.
Czarnitzki, D. , & Kraft, K. (2009). Capital Control, Debt Financing and Innovative Activity. Journal of Economic Behavior & Organization, 71 (2) , 372-383.
 De Massis, A. , Frattini, F. , Pizzurno, E. , & Cassia, L. (2015). Product Innovation in Family versus Nonfamily Firms: An Exploratory Analysis. Journal of Small Business Management, 53 (1) , 1-36.
Deangelo, L. E. (1981). Auditor Size and Audit Quality. Journal of Accounting and Economics, 3 (3) , 183-199.
Dechow, P. M. , & Dichev, I. D. (2002). The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77 (1) , 35-59.
Dhaliwal, D. , & Zhang, Y. (2013). Does Investment Efficiency Improve After the Disclosure of Material Weaknesses in Internal Control Over Financial Reporting? Journal of Accounting and Economics, 56 (1) , 1-18.
Faccio, M. , & Lang, L. H. (2002). The Ultimate Ownership of Western European Corporations. Journalof Financial Economics, 65 (3) , 365-395.
 Fama, E. F. (1980). Agency Problems and the Theory of the Firm. Journal of Political Economy, 88 (2) , 288-307.
Fama, E. F. , & Jensen, M. C. (1983). Separation of Ownership and Control. The Journal of Law and Economics, 26 (2) , 301-325.
Fernando, G. D. , Schneible Jr, R. A. , & Suh, S. (2014). Family Firms and Institutional Investors. Family Business Review, 27 (4) , 328-345.
Gomez-Mejia, L. , Cruz, C. , & Imperatore, C. (2014). Financial Reporting and the Protection of Socioemotional Wealth in Family-Controlled Firms. European Accounting Review, 23 (3) , 387-402.
Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. The American Economic Review, 76 (2) , 323-329.
Jensen, M. C. , & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3 (4) , 305-360.
Jones, J. J. (1991). Earnings Management during Import Relief Investigations. Journal of Accounting Research, 29 (2) , 193-228.
Kashani, Mohammad, Rahmani, Mohammad, (2016). The Ability of Managers to Address the Financial Crisis of Investing in Drug Companies. " 4 (13). 85-66.
Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37 (1) , 57-81.
Khodai, Valizade, Yahia, Matira. Investigating the Relationship between Capital Markets and Investment Performance in the Tehran Stock Exchange. Journal of Management Accounting, 3 (5) , 1-15.
Kuan, T. H. , Li, C. S. , & Chu, S. H. (2011). Cash Holdings and Corporate Governance in Family-Controlled Firms. Journal of Business Research, 64 (7) , 757-764.
Lee, P. M. , & O'neill, H. M. (2003). Ownership Structures and R&D Investments of US and Japanese Firms: Agency and Stewardship Perspectives. Academy Of Management Journal, 46 (2) , 212-225.
Modares, Ahmad and Raza Karzadeh. 87 Monthly Survey of Investment and Investment Performance. Stock Exchange and Securities Society, First Year, 2 (8) -11-185.
Mohammadi, Sajad, Salehi, Alakeram, (2018) , Investigating the Powerless Management Relationship with Capital Efficiency and Raw Materials, 9 (6). 45-67.
Safari Gerae, Mehdi, Rahnai. 1396, "Investigating the Relationship between Our Investment and Investment Performance and the Impact of the Purchasing Structure on the Relationship". Community 1 - We Have A Wealth Of Management And Support. 5 (1). 98-83.
Saghafi, Ali, And Majidw, Mohtamed Fazel. (2011). the Relationship between Satellite and Investment Performance in High-Capacity Firms. Financial Stability Tasks, 3 (14). 56-78.
Shleifer, A. , & Vishny, R. W. (1997). A Survey of Corporate Governance. The Journal of Finance, 52 (2) , 737-783.
Stein, J. C. (1989). Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior. The Quarterly Journal of Economics, 104 (4) , 655-669.
Stock, J. H. , & Yogo, M. (2002). Testing for Weak Instruments in Linear IV Regression (No. T0284). National Bureau of Economic Research.
Wazi, Ali, Ebrahim Bnafi, Mohammad (2017). Financial Accounting Company 8 (1). 101-13. Achleitner, A. K. , Günther, N. , Kaserer, C. , & Siciliano, G. (2014). Real Earnings Management and Accrual-Based Earnings Management in Family Firms. European Accounting Review, 23 (3) , 431-461.