Abstract:
In general, in line with the strategic planning for their companies,
managers should finance and run projects with positive net present value;
however, information asymmetry along with market fluctuations due to the
existence of confidential information between the owners and managers of the
companies as well as the representation problems arising from the separation of
ownership and management may cause the diversion of corporate investment to
accept projects with positive net present value or reject projects with negative net
present value. The problems are the result of managers' overinvestment or
underinvestment because of personal gain. Therefore, accruals quality can be
proposed to reduce the problems caused by information asymmetry and
representation costs. In this regard, in this study, multivariate regression analysis
in the form of panel data was used to examine the effect of accruals quality on the
investment efficiency of the listed companies in Tehran Stock Exchange during
2010-2014. The results of the assumptions suggest that there is a significant
inverse relationship between accruals quality and over/under-investment for the
companies listed in Tehran Stock Exchange.
Machine summary:
ISSN 2382-9745 Effect of the Quality of Accruals on the Investment Efficiency of the listed Companies in Tehran Stock Exchange Arezoo Yazdani Chamzini1, Mojtaba Motalebian Chaleshtori 2* and Mahmoud Bakhshinejad 1Graduate student of Islamic Azad University, Shahrekord Branch 2Department of Accounting, Farsan Branch, Payame Noor University,Chaharmahal va Bakhtiari, Iran 3Faculty member of Islamic Azad University, Shahrekord Branch *Corresponding author’s E-mail: accmojtaba1367@yahoo.
In this regard, in this study, multivariate regression analysis in the form of panel data was used to examine the effect of accruals quality on the investment efficiency of the listed companies in Tehran Stock Exchange during2010-2014.
The results of the assumptions suggest that there is a significant inverse relationship between accruals quality and over/under-investment for thecompanies listed in Tehran Stock Exchange.
As a result, the companies tackling with fiscal constraints may due to the high cost of financing, refuse to accept and carry out projects with positive net present value and this will lead to much lower investment returns.
Chen et al (2011) in a study entitled "accruals quality and investment efficiency of private companies in emerging markets" investigated the effect of accruals quality on two levels underinvestment and overinvestment for private companies in emerging markets.
Moreover, the accruals quality of the companies that have strong incentives to manage earnings for tax purposes has a negative relationship with the investment efficiency.
Conclusions and recommendations The results showed that there is a significant inverse relationship between accruals quality and over- and under- investment in the companies listed in Tehran Stock Exchange.