Explaining the Role of Profit Quality Upgraded Features in Increasing the Stock Price Informativeness: Evidence of Synchronicity Model Stock Return

Document Type : Research Paper

Authors

1 Assistant Prof, Faculty of Industrial Engineering and Management, Shahroud University of Technology, Shahroud, Iran.

2 PhD in Financial Management & researcher at Niroo Research Institute, Department of Accounting and Financial Sciences, Tehran, Iran.

Abstract

The aim of this study was to explaining the role of profit quality upgrader features in increasing the stock price informativeness based on evidence of stock return synchronicity model. Earnings quality is a multifaceted concept and there are several criteria for measuring it, so in order to better examine the different dimensions of earnings quality and higher reliability of results, several indicators have been used such as earnings sustainability, income smoothing, earning transparency and conservatism as earnings quality criteria. In general, using an sample, included 103 companies listed on Tehran Stock Exchange between 2008 and 2018, the results showed that income smoothing, conservatism and lack of earning transparency have a significant effect on increasing the stock price informativeness (decreasing stock return Synchronicity), so that with increasing conservatism and income smoothing have added to stock price informativeness and with increasing non-transparency of earning in financial reporting has been decreased.  Also, earnings sustainability has not a significant effect on stock return synchronicity. These results confirm that higher quality accounting information measured in this study based on earnings quality, reduces the risk and cost of accessing information and leads to an increase in the stock price informativeness which has been shown in the present study with a low synchronicity of stock returns, as a result, the information content of the stock price is increased, which is shown in this paper with a concurrent low stock return synchronicity.

Keywords

References

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History

  • Receive Date: 09 December 2019
  • Revise Date: 06 September 2020
  • Accept Date: 04 April 2020

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