Mohammadreza Mehrabanpour, Omid Faraji, Reza Sajadpour and Mohammad Alipour
The purpose of this study is to examine the impact of financial statement comparability as a qualitative feature of financial reporting on cash holdings and the mediating role of…
Abstract
Purpose
The purpose of this study is to examine the impact of financial statement comparability as a qualitative feature of financial reporting on cash holdings and the mediating role of disclosure quality and financing constraints in firms listed on the Tehran Stock Exchange (TSE).
Design/methodology/approach
Using panel data from 110 TSE-listed firms from 2011 to 2017 in Iran, this study uses the regression analysis to examine the research hypotheses. The first hypothesis examines the relationship between financial statements comparability and cash holdings and two other hypotheses examine the mediating role of financing constraints and disclosure quality in this relationship.
Findings
Based on pecking-order theory and institutional context of Iranian firms, the results show that financial reporting comparability has a significant negative impact on corporate cash holdings. The results also show that disclosure quality and financing constraints have no mediating role in the relationship between accounting comparability and cash holdings. The robustness tests with alternative measures of accounting comparability and cash holdings support the findings of this study.
Research limitations/implications
The limitations of this study are as follows: limited number of TSE companies that have necessary data to conduct research; and using the disclosure quality scores provided by TSE organization.
Practical implications
The findings suggest that creditors should consider the financial status and also the quality of financial reporting of companies, before granting credit to them. It is also recommended that regulators in the capital market publish the ratings of companies in terms of financial statement comparability alongside the disclosure ratings and a continuous regulatory oversight on companies.
Originality/value
To the best of the authors’ knowledge, this is the first empirical research on the effect of accounting comparability on the level of cash holdings that examines the mediating role of financing constraints in the context of Iran market as an emerging economy. Moreover, this is the first empirical research that studies the effect of disclosure quality on this relationship.
Details
Keywords
Seyyed Reza Nakhli, Monireh Rafat, Rasul Bakhshi Dastjerdi and Meysam Rafei
The purpose of the current paper is to analyze the simultaneous effects of oil sanctions and financial sanctions on Iran's macroeconomic variables in a small open economy in the…
Abstract
Purpose
The purpose of the current paper is to analyze the simultaneous effects of oil sanctions and financial sanctions on Iran's macroeconomic variables in a small open economy in the dynamic stochastic general equilibrium (DSGE) framework.
Design/methodology/approach
A DSGE model with the new Keynesian approach has been designed for the above mentioned purpose giving consideration to households, production, trade, oil, government and central bank sectors. All of the parameters were calibrated by using geometric means of macroeconomic variables in 2004–2017 as the steady-state values of the variables in the static model.
Findings
Amplifying the intensity of the oil sanctions reduces oil production due to decreasing investment, technology and export of oil and reduces the central bank's foreign reserves ratio to the money base that leads to an increasing exchange rate. Furthermore, oil sanctions decrease the government revenues due to a decrease in oil export and by the government imposing an expansionary fiscal policy in the form of increasing current expenditure and preserving construction expenditure to prevent deepening the recession, which causes budget deficit and then the issue of more bonds with a higher nominal interest rate. On the other hand, financial sanctions raise transaction costs and marginal costs in the trade sectors that lead to inflation and a decrease in nonoil export and various kinds of imports. Due to inflation and uncertainty, consumption of a household increases and investment expenditure of a household decreases.
Originality/value
To the best of the author's knowledge, few studies in the world have analyzed the economic effect of the sanctions in the framework of DSGE models. There is no study in Iran to date which investigates the effects of the sanctions in the form of a DSGE model. So, this paper is the first study in Iran and one of the few studies in the world using a DSGE model for analyzing the effects of sanctions. Imposing three kinds of oil sanctions in addition to a financial sanction is another innovation of the current paper.
Details
Keywords
Purpose – This chapter examines the impact of oil price volatility on domestic political stability in a key supplier state.Methodology – This chapter uses prospect theory to…
Abstract
Purpose – This chapter examines the impact of oil price volatility on domestic political stability in a key supplier state.
Methodology – This chapter uses prospect theory to analyse socio-political instability based on significant changes in a supplier state's largest revenue source. Prospect theory posits that decisions are framed around a pivotal reference point which may or may not correspond to the status quo, but which nonetheless directly affects risk appetite. This analysis uses Iran as a case study, and relative oil price as the reference point to analyse risk-acceptant decision-making surrounding the 2009 Presidential election.
Findings – Dramatic economic context could be a contributing factor to risk-acceptant behaviour in domestic politics. Specifically, volatile price swings in Iran's main source of income, oil, which contributes over 80 per cent in direct and indirect revenue, and perceived external decline therein, may have been a destabilising factor. Combined with loss aversion, this context may have facilitated measures beyond those dictated by rational utility calculus to secure conservative rule in the 2009 election, and in the ensuing unrest.
Research Limitations – Prospect theory is difficult to test outside of carefully framed laboratory experiments. Although its insights have been applied to investment behaviour, management and domestic politics, in conflict studies, robust empirical support remains underdeveloped. Moreover, since prospect theory is an individual model of decision-making, difficulties arise when dealing with nation states with multiple centres of power.
Implications – Prospect theory may be a useful analytic tool for analysing risk-acceptant decision-making in the context of dynamic economic situations.
Originality – Although this analysis complements research on rentier state theory, prospect theory integrates recent developments in behavioural economics and political psychology that may offer a new way to conceptualise the role of expectations and choice framing in decision-making which drives political stability.
This study aims to investigate the impact of socially oriented responsibility (SOR) (i.e. social, environmental, ethical and governance) on the cost of equity in the firms listed…
Abstract
Purpose
This study aims to investigate the impact of socially oriented responsibility (SOR) (i.e. social, environmental, ethical and governance) on the cost of equity in the firms listed on the Tehran Stock Exchange.
Design/methodology/approach
The industry-adjusted earnings price ratio (IndEP) was used to evaluate the cost of equity. The cost of equity is calculated for those industries that, except firm i (with a positive profitability), have at least five other firms with a positive profitability in the industry. Hence, 79 firms were selected among seven industries from 2012 to 2022 for hypothesis testing. Gordon’s growth model was used to evaluate the cost of equity and assess the robustness of the findings. The information about 183 companies was retrieved for analysis based on Gordon’s growth model.
Findings
The results showed that SOR positively affects firms’ cost of equity. Besides, testing the details also showed that social practices (SO), environmental practices (EN), governance practices (GO) and ethical practices (ET) have a positive impact on the cost of equity. The robustness of results supported the main inferences.
Originality/value
Iran’s economic environment and capital market have been open to discussion within the global community. It is important to note that the relationship between SOR and the cost of equity in developed markets cannot be easily applied to developing Asian markets. Therefore, the present findings, along with the challenges faced in a developing Islamic economy, can contribute to informed decision-making on a global scale.