Accounting variables and prediction of stock return: Before and after mandatory adoption of accounting standards.

اقتصاد پولی مالی

Article 2, Volume 17, Issue 33, January 2011   

Document Type: پژوهشی

DOI: 10.22067/pm.v17i33.27302

Authors

Mohammad reza abbaszadeh^* ; Hojatollah atashi golestani

Abstract

Since 2001 the adoption of Iran accounting standards has become obligatory. This study by using a sample of companies listed in Tehran stock exchange (TSE) compares the value relevance of ten selected accounting variables in two periods, before mandatory adaption of accounting standards (1996-1998) and after that (2005-2007). In this study the researchers have tried to control the effect of economic situations and omitted variables on the results of research. Therefore, two economic variables, inflation (CPI) and growth of gross domestic product (GGDP) are added to regression models of hypothesis. Also, hypotheses are tested by pooled method. Results show that, a relation between some accounting variables and stock return in both periods (before and after adoption of standards). The result of test of hypothesis of the third group indicates that there is significant decrease in adjusted R-Square of regression models in post-standards comparing with pre-standards period about five variables of total assets and its changes, operating income and its changes, book value of equity and in a model involving all variables of study, but decrease of predictive ability of net income, cash flows from operation and their changes and changes of book value of equity isn’t significant.

Keywords

value relevance; predictive ability; decision usefulness; Iran accounting standards; accounting variables; stock returns