The Impact of Moral Hazard between Managers and Shareholders on the Accounting Information Quality Considering the Mediating Role of Financial Reporting Complexity and the Tone of Managers’ Explanatory Reports

Document Type : Research Paper

Authors

1 Department of Accounting, Va.C., Islamic Azad University, Varzaghan, Iran.

2 Department of Accounting, Ta.C., Islamic Azad University, Tabriz, Iran.

3 Department of Accounting, Seraj Institute of Higher Education, Tabriz, Iran.

10.22103/jak.2026.25693.4234

Abstract

Objective: The present study aims to examine the impact of moral hazard between managers and shareholders on accounting information quality, with the mediating role of financial reporting complexity and the tone of managers’ explanatory reports.
 
Method: The research population consists of 152 companies listed on the Tehran Stock Exchange during the period from 2018 to 2023, encompassing a total of 912 observations. To test the research hypotheses, multiple regression analysis was conducted using panel data.
 
Results: The research findings indicated that moral hazard between managers and shareholders has a negative and significant effect on accounting information quality, while it exerts a positive and significant influence on financial reporting complexity and the tone of managers’ explanatory reports. Furthermore, both financial reporting complexity and the tone of managers’ explanatory reports have a negative and significant impact on accounting information quality. Ultimately, financial reporting complexity and the tone of managers’ explanatory reports play a mediating role in the impact of moral hazard between managers and shareholders on accounting information quality.
 
Conclusion: When managers and shareholders are exposed to moral hazard, accounting information quality declines. Companies often exacerbate this adverse effect by increasing financial reporting complexity and employing a biased or occasionally ambiguous tone in managerial explanatory reports. Managing moral hazard and enhancing the transparency of financial reporting and report tone play a crucial role in improving accounting information quality.

Keywords

Main Subjects


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Articles in Press, Accepted Manuscript
Available Online from 24 May 2026
  • Receive Date: 07 October 2025
  • Revise Date: 10 December 2025
  • Accept Date: 28 January 2026