Mahdi Salehi, Hossein Tarighi and Tahereh Alidoust Shahri
The purpose of this paper is to investigate the relationship between auditor characteristics and the level of tax avoidance in an emerging market.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between auditor characteristics and the level of tax avoidance in an emerging market.
Design/methodology/approach
In this regard, the effect of various factors such as auditor tenure, auditor industry specialization, audit reports and audit fees on tax avoidance was examined. The study sample includes listed companies in the Tehran Stock Exchange. The time period of study is six years from 2011 to 2016. Also in this study, firm size, leverage, firm age and auditor size were controlled.
Findings
The results of this research were determined in four hypotheses. First and second hypotheses that explore the relationship between auditor tenure and auditor industry specialization with tax avoidance were not confirmed. But the results showed a significant relationship between the type of audit opinions and audit fees with tax avoidance.
Originality/value
The current study investigates the auditor characteristics on tax avoidance in a developing nation of Iran and the results may helpful the developing countries.
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Mahdi Salehi, Hossein Tarighi and Malihe Rezanezhad
The purpose of this paper is twofold: first, to investigate the relationship between some characteristics of corporations including firm size, financial leverage, profitability…
Abstract
Purpose
The purpose of this paper is twofold: first, to investigate the relationship between some characteristics of corporations including firm size, financial leverage, profitability, firm age and the type of industry with social responsibility disclosure of firms listed on Tehran Stock Exchange (TSE); and second, to study the association between the level of corporate social responsibility disclosure (CSRD) and some of the audit variables such as audit fees, audit tenure and audit firm’ size.
Design/methodology/approach
The study population consists of 125 firms listed on the TSE during the years 2010–2015. Following Salehi et al. (2017), content analysis is used to measure the level of social responsibility disclosure, and hypotheses are performed using multiple regression analysis and R software.
Findings
The results represented that there is a positive significant relationship between a firm size and a firm age with the level of CSRD. However, there is a negative significant association between financial leverage and profitability with the level of CSRD. Given that CSRD is different among various industries and the type of industry can be an influential factor in CSRD, an industry type’ variable in the fourth hypothesis is of a type of index variable and has eight levels, of which the first level is ranked as the base level. Our findings showed that the level of CSRD at industries of machinery and appliances, production of metal products, food and beverage products, and textiles is lower than the baseline level (pharmacy). Nevertheless, companies in the fifth industry (mineral products) have a higher level of CSRD in comparison with the pharmacy industry. Moreover, the authors find that there is a significant positive connection between audit fees and CSRD. This implies that Iranian managers in an inflationary economy probably manage earnings when they provide more CSRDs, which leads to increase in the audit risk and audit fees.
Practical implications
Needless to say, the findings of this paper will have practical implications for investors, auditors and other users of financial statements. First of all, this study will aware them of the fact that when a country faces economic sanctions and most of its companies are in financial strain investors should not consider the firms engaging in corporate social responsibility activities to behave morally and provide transparent financial reports. Second, the results will convince auditors to be conservative toward the firms that are financially distressed, for audit risk of them will be high. Thus, policymakers should be cautious concerning directors’ opportunistic actions and increase monitoring to enforce social obedience.
Originality/value
The turning point of this research is related to the time period of research related to firms that have faced severe financial problems due to economic sanctions. In fact, the study revealed another aspect of CSRD that could have negative consequences when managers are in financial strain and take opportunistic actions.
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Mahdi Salehi, Hossein Tarighi and Samaneh Safdari
This paper aims to investigate the effects of some corporate governance mechanisms and executive compensation on audit fees in an emerging market.
Abstract
Purpose
This paper aims to investigate the effects of some corporate governance mechanisms and executive compensation on audit fees in an emerging market.
Design/methodology/approach
The study population consists of 540 observations and 90 listed companies on the Tehran Stock Exchange during the years 2009-2014. The statistical model used in this study is a multivariate regression model; besides, the statistical technique used to test the hypotheses proposed in this research is panel data.
Findings
The changes in the value of a CEO’s own firm stock option portfolio, in thousands of rials (Iran’s currency), for a 0.01 change in stock return volatility and stock price are defined as Vega and Delta, respectively. The results demonstrated that there is a positive association between audit fees and delta, but not Vega; this means that a fee premium is linked to CEO Delta incentives. The findings show that Iranian companies pay more audit fees when they give managers more rewards. In addition, the results show that there is not a significant relationship between fees resulting from audit risk and Delta and Vega incentives of the board. Inconsistent with agency theory, the authors found that the independence of board members did not have any effect on audit fees. As a final point, the outcomes of the paper demonstrate that managers who invest in companies under their own management do not have any impact on the amount of audit fee. To put it another way, there is not any significant connection between the board ownership and audit fees.
Practical implications
This is one of the most important studies that simultaneously surveys the impacts of corporate governance mechanisms and executive compensation in the Iranian audit market. The results of this study will reveal more than the role of corporate governance mechanisms for society and users of financial statements because as tools on the CEO actions, they always have to pay attention to the implementation of corporate principles in the economic entity’ operation.
Originality/value
The present study has examined the relationship between two cases of corporate governance mechanisms named the board independence and the board ownership with audit fees in a country where, to the authors’ knowledge as in most other developing markets, such a relationship has not been a subject of empirical research. Moreover, the use of a two-dimensional measure of executive compensation, namely, Delta and Vega incentives, primarily considering research undertaken in an emerging market, as a valuable contribution may be observed.
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Mahdi Salehi, Mahmoud Lari DashtBayaz, Somayeh Hassanpour and Hossein Tarighi
This study aims to investigate the effects of managerial overconfidence on conditional conservatism and real earnings management among companies listed on the Tehran Stock…
Abstract
Purpose
This study aims to investigate the effects of managerial overconfidence on conditional conservatism and real earnings management among companies listed on the Tehran Stock Exchange (TSE).
Design/methodology/approach
In this paper, the authors used the model of Ball and Shivakumar (2006) for measuring the effect of moderating overconfident management on conditional conservatism in accounting; moreover, the model of Roychowdhury (2006) is used for evaluating the relationship between managerial overconfidence and real earnings management. The study population consists of 1,144 observations and 143 firms listed on TSE over an eight-year period between 2008 and 2015. The statistical model used in this paper is a multivariate regression model; besides, the statistical technique used to test the hypotheses is panel data.
Findings
Consistent with the expectations, the results showed that there is a negative relationship between managerial overconfidence and conditional conservatism. Furthermore, the findings suggest that managerial overconfidence is negatively connected with real earnings management. This implies that when Iranian managers have many financial problems, they do not engage in real earnings management, as the real earnings management does not increase the value of the companies in the long run and even it cause damage to them.
Originality/value
This is one of the most important research that simultaneously surveys the impact of managerial overconfidence on conditional conservatism and real earnings management in a developing market called Iran. What really sets this study apart from other papers is that most Iranian firms between 2008 and 2015 because of economic sanctions faced severe financial problems. From this perspective, this study contributes to the research literature by expanding the knowledge of conservatism in the emerging economies.
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Mahdi Salehi, Mohammad Tahervafaei and Hossein Tarighi
The purpose of this paper is to evaluate the relationship between the characteristics of the audit committee and the board and profitability among the companies listed on the…
Abstract
Purpose
The purpose of this paper is to evaluate the relationship between the characteristics of the audit committee and the board and profitability among the companies listed on the Tehran Stock Exchange (TSE) in Iran.
Design/methodology/approach
In this study, the companies listed on the TSE during the period from 2010 to 2015 are investigated. The Linear panel regression method is employed for this purpose. The independent variables of the study are composed of some corporate governance mechanisms including audit committee size, audit committee expertise, board size, board independence, chief executive officer (CEO) duality, and institutional ownership.
Findings
In spite of the fact that there does not exist any significant association between audit committee size and corporate financial performance, the results indicate that there is a positive and significant relationship between audit committee financial expertise and profitability. The authors found that the number of board members cannot affect corporate performance; moreover, duality of CEO role in Iranian companies does not affect company performance. However, the outcomes showed a positive and significant association between the proportion of outside directors on the board (board independence) and profitability at 99 percent confidence level. This implies that the role of non-executive directors in Iran is inconsistent with the stewardship theory. This is due to the fact that independent directors understand the status of business and market better than the board’s executive members. Finally, the results indicated that there is no significant association between institutional owners and Iranian companies’ performance.
Practical implications
The findings of this study will reveal more than ever the role of corporate governance mechanisms for society and users of financial statements because as tools on the CEO actions, they always have to pay attention to the implementation of corporate principles in the economic entity’ operation.
Originality/value
This is one of the most important studies that simultaneously examine the impacts of characteristics of the audit committee and the board on profitability in an emerging market, and the results of the study may give strength to Iranian as well other developing countries.
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Mahdi Salehi, Hossein Tarighi and Malihe Rezanezhad
This study aims to examine the effect of the structure of board of directors and company ownership on social responsibility disclosure of listed companies on the Tehran Stock…
Abstract
Purpose
This study aims to examine the effect of the structure of board of directors and company ownership on social responsibility disclosure of listed companies on the Tehran Stock Exchange.
Design/methodology/approach
The variables of the study included independent board of directors, institutional ownership, managerial ownership, family ownership and family-managerial ownership. The study population consisted of 125 listed companies on the Tehran Stock Exchange during the years 2009-2014. Content analysis used to measure social responsibility disclosure level and test hypothesis was performed using multiple regression analysis.
Findings
The results demonstrated that there was no significant relationship between any of the independent variables and the level of social responsibility disclosure. This study empirically shows managers, investors and other stakeholders that if business owners are made of different groups, namely, institutional ownership, managerial and family ownership, it will not affect the social responsibility disclosure in annual reports.
Originality/value
The outcomes of the current study may bridge the gap between social responsibility disclosure and ownership structure in a developing country like Iran.
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Mahdi Salehi, Hossein Tarighi and Haydar Sahebkar
The purpose of this study is to examine high-quality auditors’ conservatism in Iran market based on the classification of Tehran Stock Exchange (TSE) in terms of their reaction to…
Abstract
Purpose
The purpose of this study is to examine high-quality auditors’ conservatism in Iran market based on the classification of Tehran Stock Exchange (TSE) in terms of their reaction to client’s earnings management behavior and their limitations to issue the going concern opinions (GCOs) over an eight-year period from 2009 to 2016.
Design/methodology/approach
The study population consists of 1,376 observations and 172 companies listed on the TSE during the years 2009-2016. Following the prior studies, the authors used the modified Jones model to measure discretionary accruals as a proxy for earnings management.
Findings
The results witnessed a negative relationship between the size of the audit firm and discretionary accruals; besides, the relationship between abnormal accruals and GCO on companies audited by high-quality audit firms is higher than other companies. In other words, firms with GCO, which were audited by the Iranian large auditors, report negative abnormal accruals less than those audited by non-large auditors. In short, in spite of the special features of Iran market because of economic sanctions, this paper extends prior literature clarifying that auditors’ conservatism induces accrual reversals when auditors issue GCOs. One interpretation of this result is that the existence of such association is because of not only auditor conservatism but also financially distressed firms.
Practical implications
The outcomes of this paper will help to fill the knowledge gap related to this issue between developing and developed countries because this investigation exposed more than ever the vital role of the auditor as an observer on the financial statements. Without any exaggeration, this research will make investors and stakeholders aware of this fact that auditor conservatism will be effective in reducing the manipulation of financial reporting and agency problems in emerging markets, particularly those markets facing with economic sanctions like Iran.
Originality/value
Because of Iran’s dire economic situation during the period under consideration, this is one of the most comprehensive research among the countries of the Middle East that surveys the impact of auditor conservatism on accruals and GCO in an emerging market, namely, Iran.
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Mahdi Salehi, Nadia Mahdavi, Saeed Zarif Agahi Dari and Hossein Tarighi
The purpose of this paper is to investigate the relationship between access to financial resources, working capital with surplus stock returns and value of the company in Iran.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between access to financial resources, working capital with surplus stock returns and value of the company in Iran.
Design/methodology/approach
The study population consists of 728 observations and 91 firms listed on the Tehran stock exchange during an eight-year period between 2009 and 2016. The statistical model used in this study is a multivariate regression model; further, the statistical technique used to test the hypotheses is panel data.
Findings
The results saw a negative and significant linkage between changes in cash and stock’ excess returns, whereas no meaningful association between changes in working capital and stock surplus returns was seen. In other words, an Iranian rial (Iran’s currency) invested in working capital worth less on average than a rial held in cash. Furthermore, the authors realized that in an inflationary economy, firms mainly pay more dividends so as to illustrate better their financial position and also to attract more investors’ trust. The results also indicated that the final value of working capital in the companies that are faced with financial constraints is more than companies that are not faced with financial constraints. Subsequently, after the elimination of the effects of inflation on stock returns, it was found there is not any significant association between the stock’s real return and firm value.
Practical implications
This is one of the most comprehensive research works in Iran that simultaneously surveys the impacts of access to finance and working capital on firm value. This research warns corporate managers to pay more attention to the importance of keeping cash to finance and manage working capital for profitability and sustainability of their company’s operations. Surely, by understanding the relationship between cash holdings, working capital management and stock surplus return, investors will be able to make appropriate decisions about the optimal choice of funds.
Originality/value
What really will fascinate other scholars about this paper is the time period of the study because there were unprecedented sanctions against Iran market and many manufacturing industries were in financial strain. Without hesitation, the paper will make aware investors and stakeholders of this fact that cash holdings will be a good way in reducing the corporate financial problems in emerging markets, particularly those markets face financial sanctions like Iran.
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Mahdi Moradi, Hossein Tarighi, Reza Hosseinipour and Mahdi Saravani
The purpose of this paper is to investigate factors affecting the students’ learning of the concepts of the accounting information systems (AIS) in Iran.
Abstract
Purpose
The purpose of this paper is to investigate factors affecting the students’ learning of the concepts of the accounting information systems (AIS) in Iran.
Design/methodology/approach
The statistical population of the study is the accounting and auditing students (Master’s degree) who have the lesson of AIS at state and private universities, as well as the institutes of higher education in 2017. The Likert scale has been used to design questionnaires. Further, the data were analyzed using structural equation modeling with the partial least squares technique.
Findings
Overall, after analyzing and comparing the results of the hypotheses, it was found that, respectively, “assistance to students,” “the power of critical thinking,” “academic professors skills,” “kind of transition to university,” “AIS course structure,” “proper timing of AIS presentation,“ “presentation of a prerequisite course” and finally, “appreciation of AIS” have the greatest impact on the level of student learning in AIS lesson. The results of this paper showed that “teaching style” and “having the previous background of the information system concepts” do not have a statistically significant effect on students’ general learning.
Originality/value
Without any overstatement, this paper will warn educational authorities in emerging countries that lack of attention to factors affecting university students’ learning can have serious consequences for the market of a country. Other than that, this paper will make university professors aware of the effects of effective methods for better student learning in the field of information technology, so that they can make a better assessment of the importance of AIS course.
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Mahdi Moradi, Mahdi Salehi, Hossein Tarighi and Mahdi Saravani
Independent auditors play an important role in increasing the reliability of financial information by giving their professional opinion on the financial statements of business…
Abstract
Purpose
Independent auditors play an important role in increasing the reliability of financial information by giving their professional opinion on the financial statements of business units. Therefore, the purpose of this study is to investigate the relationship between the audit adjustments and financing of companies.
Design/methodology/approach
The sample of the study includes 173 Iranian companies listed on the Tehran Stock Exchange (TSE) between 2010 and 2017.
Findings
There is no significant association between the profit incremental audit adjustments (Disagreement) and financing of companies in the current year and the following year through a loan. Furthermore, there is no meaningful relationship between the earnings downward/upward audit adjustments (Disagreement) and the financing of companies in the current year and the following year through ordinary stocks. However, there is a meaningful relationship between the profit downward audit adjustments (Disagreement) and the financing of firms in the current year through a loan. In general, as Iran's economy is facing severe economic sanctions, the existence of a high inflation rate has led to a steady increase in the stock prices of Iranian companies; hence, investors regardless of audit reports prefer to invest their money in the stock market so that it does not lose its purchasing power. Under these disaster economic circumstances, creditors are less willing to lend to companies with lower profits.
Originality/value
The results of the current study extend the knowledge of previous studies as financial pressures from economic sanctions have both positive and negative psychological effects on corporate financing.