Accounting Asset Informativeness Considering Innate and Discretionary Factors: The Effect of Standards Implementation Quality and Fundamental Factors

Document Type : Research Paper

Authors

Department of Accounting, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran.

10.22103/jak.2024.22895.4012

Abstract

Objective: This study investigates the informativeness of accounting assets by considering innate and discretionary factors, as well as the impact of standards implementation quality and fundamental.
 
Method: This research is applied in purpose and descriptive in implementation. Data were collected through library research (reading books and articles) and referring to databases. The research model was estimated using panel data, controlling for year and industry effects, through the ordinary least squares (OLS) method with robust standard errors (clustering errors at the firm level). Moreover, to measure the informativeness of assets, a ten-year rolling regression of lagged net operating assets on firm earnings was employed. Accordingly, a sample of 249 companies listed on the Tehran Stock Exchange was selected and analyzed over the period 2004 to 2022.
 
Results: The results revealed that net operating assets possess informative power regarding the firm’s future conditions, and that the level of accounting asset informativeness varies depending on innate and discretionary factors. Moreover, fundamental variables exert different effects on the explanatory power of the accounting assets’ awareness criterion, depending on whether intrinsic or total factors are considered. Additionally, the quality of accounting standards implementation positively affects asset informativeness.
 
Conclusion: The operating assets reported on the balance sheet provide insights into both the company’s future conditions and its past decisions. Furthermore, the quality of accounting standards implementation improves asset informativeness. These results could be important for investors and standard setters.

Keywords

Main Subjects

References

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History

  • Receive Date: 02 February 2024
  • Revise Date: 18 May 2024
  • Accept Date: 26 May 2024

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