Abstract:
Various researches have been carried out about benefits of accounting information and their influence on decision making of financial statements users. For example, many researches have examined the relationship between accounting variables and stock returns or stock price. This study determines and compares the relative and incremental content of accounting variables, too. For this purpose, the relationship between stock return and accounting variables is examined for production companies accepted in Tehran Stock Exchange (TSE), during period of 2000 through 2004. Independent variables, in this study, are Net Income (NI), Operational Profit (OP) and Cash Flows from Operations (CFO) and dependent variable is annual Stock return. In order to eliminate the effect of company size, we choose total asset as control variable. The results show that OP has related information content in comparison with other variables and NI and OP have incremental content beyond each other, but CFO doesn’t have incremental content.
Machine summary:
For this purpose, the relationship between stock return and accounting variables is examined for production companies accepted in Tehran Stock Exchange (TSE), during period of 2000 through 2004.
To achieve these objectives, we developed six hypotheses as follow: Three of these hypotheses are related to the issue of relative information content of research’s variables: H1: NI outperforms OP and CFO in explaining the stock returns in production companies accepted in Tehran Stock Exchange.
The other hypotheses related to the issue of incremental information content of research’s variables are as follows: H4: NI provides incremental information beyond that contained in OP and CFO in production companies accepted in Tehran Stock Exchange.
H6: CFO provides incremental information beyond that contained in NI and OP in production companies accepted in Tehran Stock Exchange.
H6: CFO provides incremental information beyond that contained in NI and OP in production companies accepted in Tehran Stock Exchange.