Signaling through Discretionary Accruals and Its Impact on Capital Investment and ROA in Financially Constrained Firms

Document Type : Research Paper

Authors

1 Professor of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

2 Ph.D Student in Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

Abstract

Abstract
The current research examine the signaling through discretionary accruals and its impact on capital investment and ROA of financially constrained firms in Tehran Stock Exchange. For this purpose, four hypothesis have been developed. three multivariate liner regression models and panel data used for examining the research hypothesis. The sample of current research consists of 128 firms listed in Tehran stock exchange during the 1386-1393. The results show that financially constrained firms with high investment opportunities have significantly higher discretionary accruals compared to financially constrained firms with low investment opportunities. Findings also show that constrained high-accrual firms have higher earnings announcement returns compared to constrained low-accrual firms, and invest in projects that appear to improve ROA.

Keywords

References

Baradaran Hassanzadeh, R., Badavar Nahandi, Y., Negahban, L. (2014). The impact of financial constraints and agency costs of investment efficiency. Financial Accounting Researches, 19(1), 89-106 [In Persian].
Dastgir, M., Ghanizadeh, B. (2014). The effect of accrual quality on long-term investment. Quarterly Financial Accounting, 20(5), 42-65 [In Persian].
Hashemi, S.A., Sadeghi, M. (2009).The relationship between discretionary accruals and operating cash flow, return and investment efficiency in companies listed in Tehran Stock Exchange. Quarterly Financial Accounting, 2(1), 1-17 [In Persian].
Kashanipour, M., Rasekhi, S., Naghinejad, B., Rassayian, A. (2010). Financial constraints and investment-cash flow sensitivity in companies listed in Tehran Stock Exchange. Journal of Accounting Advances, 2(2), 51-74 [In Persian].
Modares, A., Mohamadi, J. (2009). The effect of earning management on investment decisions in tehran stock exchange. Bourse, 87, 34-43 [In Persian].
Journal of Accounting Knowledge
Volume 8, Issue 3 - Serial Number 30
November 2017
Pages 113-140

Files

History

  • Receive Date: 01 March 2017
  • Revise Date: 13 June 2017
  • Accept Date: 19 August 2017

Share

How to cite

Statistics