University of Isfahan Financial Accounting Research 2322-3405 16 1 2024 11 21 Corporate Governance Code and Earnings Management Corporate Governance Code and Earnings Management 1 26 28482 10.22108/far.2024.139571.2006 FA Azam Valizadeh Iarijani Assistant Professor, Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran. Reyhaneh Iranpour MSc. of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran. Iran. Journal Article 2023 10 24 The proper implementation of corporate governance in companies plays a significant role in their management and leadership, protecting the interests of shareholders and preventing opportunistic behavior by managers. Considering this issue and the new corporate governance code in the Iranian capital market, in this research, the impact of the new corporate governance code on accrual-based earnings management and real earnings management is investigated. The statistical sample of the research included 117 companies listed in Tehran Stock Exchange during the years 2014 to2021. The results of the research based on regression analysis of panel data indicated that the new corporate governance code had a negative and significant impact on earning management based on the manipulation of accruals. Also, the results have shown that the announcement of the corporate governance code had a negative and significant impact on real earning management based on the manipulation of production costs, discretionary costs, and operating cash flows. Therefore, the requirements of the Securities and Exchange Organization regarding corporate governance in the capital market have been able to lead to the protection of investors' rights and the improvement of the quality of financial reporting of companies. Introduction The issue of corporate governance has been noticed around the world since the beginning of 2000, and almost every country is trying to implement good corporate governance practices in their business companies. Corporate governance is the set of relationships between executive directors, board members, shareholders, and other stakeholders of the company, which determines a structure for formulating the company's goals and ways to achieve them, as well as how to evaluate and monitor performance (OECD, 2004). The goal of corporate governance is to reduce agency problems and costs to maximize shareholder wealth. Previous research has shown that companies with good corporate governance have better financial performance, higher stock liquidity, and lower bankruptcy risk. Corporate governance can reduce the information asymmetry between internal and external organizations and make corporate information more transparent (Nguyen et al., 2024). Considering the regulatory and legal changes and the process of corporate governance in all countries and internationally, today the importance of implementing effective corporate governance has been continuously noticed in the capital markets and companies are obliged to inform the public about their corporate governance measures. In Iran, the corporate governance guidelines were approved in June 2018 by the Board of Directors of the Securities and Exchange Organization in six chapters: definitions, board of directors and CEO, general meetings of shareholders, how to select board members and independent board members, and accountability and disclosure of information. This instruction was notified for the compliance of companies admitted to the Tehran stock exchange and Iran Fara bourse. Also, this instruction was revised in different stages, the last revised version of which is from 2023 (Stock Exchange Organization, 2023). Considering the above and considering the newness of the corporate governance guidelines in the Iranian capital market as well as the importance of the effects of the aforementioned regulations on companies, the main issue of this research is to investigate the effect of the notification of the aforementioned guidelines on the behavior of companies' earnings management. It should be noted that so far, no research has been conducted that has investigated the effect of internal corporate governance regulations on various dimensions of financial reporting quality, and the results of this research can represent the results of the efforts that have been made to formulate corporate governance regulations. In this research, earnings management through accrual management and real earnings management have been considered. Also, to measure real earnings management, real earnings management based on manipulation of production costs, discretionary expenses, and operational cash flows has been used. Based on the above, research hypothesis are: 1) Announcement of corporate governance guidelines has a significant negative impact on earnings management based on the manipulation of accruals. 2) Announcement of corporate governance guidelines has a significant negative impact on real earnings management based on the manipulation of abnormal production costs. 3) Announcement of the corporate governance guidelines has a significant negative impact on the real earnings management based on the manipulation of abnormal discretionary expenses. 4) Announcement of corporate governance guidelines has a significant negative impact on real earnings management based on the manipulation of abnormal operating cash flow. Research Methodology This research is placed in the category of applied research; Because its basic purpose is to find solutions for existing problems and current conditions. Secondary data is usually used to conduct this type of research. In this research, the researcher describes the nature of the topic in question. Therefore, it is a type of descriptive research. Also, the current research can be considered correlational research; Because it examines the relationship between variables and their explanation. In general, to conduct any research, two types of information are needed: the library part and the experimental part; In this research, to collect library and experimental information, books, magazines and specialized articles, financial statements, explanatory notes, as well as existing information banks, such as Rahvard Novin, Codal and the stock exchange website, were used respectively. The software used to test all the models of this research is the 9th version of EViews. The statistical population of this research is all the companies admitted to the Tehran Stock Exchange during the years 2014 to 2021. The sample was selected from among the companies listed in the Tehran Stock Exchange using some criteria. According to the criteria, among all the companies listed in the Tehran Stock Exchange, 117 companies were considered as the investigated companies in this research. Conclusion and discussion The results of testing the hypotheses of this research showed that none of the hypotheses examined in this research were rejected and the announcement of corporate governance guidelines affects earnings management (accrual earnings management and real earnings management based on the manipulation of production costs, discretionary expenses, and operating cash flows). It has had a significant negative effect and has led to the reduction of managers' opportunistic manipulations. Based on the result of the first hypothesis, the announcement of the corporate governance guidelines of the Stock Exchange and Securities Organization has led to the reduction of earnings management based on accruals. In the interpretation of this result, it can be said that the requirements contained in the mentioned instructions to strengthen the corporate governance mechanisms at the level of capital market companies have been able to reduce the possible motivation of managers to manipulate earnings by using allowed accounting procedures and through accruals and therefore, it seems that with the help of this guidelines, the capital market supervisory body has been able to reach its final goal, which is to support the stockholders, especially the shareholders. In other words, the recent requirements of corporate governance have succeeded in improving the quality of financial reporting and the quality of companies' earnings, and this promises investors that they can make decisions regarding their investment options in the capital market with more trust and confidence in the financial reports of companies. According to the results of the second to fourth hypotheses of this research, it can be said that the establishment of corporate governance requirements in Iran's capital market has led to a decrease in real earnings management through the manipulation of production costs, discretionary expenses, and operating cash flows. In this regard, as it was stated in some previous research, the establishment of disclosure requirements and regulations and corporate governance has led to the change of earnings management procedures from the management of accruals to the real management of earnings; This is while, based on the results of this research, the implementation of corporate governance mechanisms has had significant negative effects on the real earnings management. Among the reasons for this, it can be mentioned that in the existing corporate governance rules, the subject of transactions with related parties, which is one of the tools used for real earnings management, has been given special attention. Also, in the third chapter of the corporate governance guidelines, the necessary characteristics for the members of the board of directors and the CEO have been described, that they must have the necessary education and experience and have no definite criminal or disciplinary convictions subject to the laws and regulations of the capital market, and it seems that with these requirements, relatively more knowledgeable managers have played a role in the board of directors of companies and have been able to reduce the motivation of executive managers to manipulate the real activities of the company in the direction of real earnings management. According to the results of this research and considering the inhibiting effects of the implementation of corporate governance on the earnings management of companies, it is suggested that supervisory institutions such as the Securities and Exchange Organization as a supervisory institution for companies have more supervision and control over the implementation of corporate governance principles and related regulations; Because the results of this research have shown that establishing these criteria can reduce the opportunistic actions of managers. It is also suggested to provide the conditions for improving the ability and skills of the members of the board of directors by holding continuous training sessions about the implementation of the corporate governance guidelines of the Securities and Exchange Organization. In addition, creditors, shareholders, and investors are suggested to take into account the degree of compliance with the corporate governance guidelines in reviewing the company's situation and making their decisions; Because better compliance with this instruction reduces the possibility of earnings management behavior based on accruals and real earnings management in companies. Based on the results of this research, future researchers are suggested to investigate the effect of the announcement of corporate governance rules on the quality of financial statements and reports as well as the quality of internal control reports of companies. Also, considering the relationship between corporate governance and independent auditors, it is suggested to pay attention to the impact of the notification of the mentioned rules on the audit quality. In addition, a comparative study of the hypotheses of this research by industries is recommended. The proper implementation of corporate governance in companies plays a significant role in their management and leadership, protecting the interests of shareholders and preventing opportunistic behavior by managers. Considering this issue and the new corporate governance code in the Iranian capital market, in this research, the impact of the new corporate governance code on accrual-based earnings management and real earnings management is investigated. The statistical sample of the research included 117 companies listed in Tehran Stock Exchange during the years 2014 to2021. The results of the research based on regression analysis of panel data indicated that the new corporate governance code had a negative and significant impact on earning management based on the manipulation of accruals. Also, the results have shown that the announcement of the corporate governance code had a negative and significant impact on real earning management based on the manipulation of production costs, discretionary costs, and operating cash flows. Therefore, the requirements of the Securities and Exchange Organization regarding corporate governance in the capital market have been able to lead to the protection of investors' rights and the improvement of the quality of financial reporting of companies. Introduction The issue of corporate governance has been noticed around the world since the beginning of 2000, and almost every country is trying to implement good corporate governance practices in their business companies. Corporate governance is the set of relationships between executive directors, board members, shareholders, and other stakeholders of the company, which determines a structure for formulating the company's goals and ways to achieve them, as well as how to evaluate and monitor performance (OECD, 2004). The goal of corporate governance is to reduce agency problems and costs to maximize shareholder wealth. Previous research has shown that companies with good corporate governance have better financial performance, higher stock liquidity, and lower bankruptcy risk. Corporate governance can reduce the information asymmetry between internal and external organizations and make corporate information more transparent (Nguyen et al., 2024). Considering the regulatory and legal changes and the process of corporate governance in all countries and internationally, today the importance of implementing effective corporate governance has been continuously noticed in the capital markets and companies are obliged to inform the public about their corporate governance measures. In Iran, the corporate governance guidelines were approved in June 2018 by the Board of Directors of the Securities and Exchange Organization in six chapters: definitions, board of directors and CEO, general meetings of shareholders, how to select board members and independent board members, and accountability and disclosure of information. This instruction was notified for the compliance of companies admitted to the Tehran stock exchange and Iran Fara bourse. Also, this instruction was revised in different stages, the last revised version of which is from 2023 (Stock Exchange Organization, 2023). Considering the above and considering the newness of the corporate governance guidelines in the Iranian capital market as well as the importance of the effects of the aforementioned regulations on companies, the main issue of this research is to investigate the effect of the notification of the aforementioned guidelines on the behavior of companies' earnings management. It should be noted that so far, no research has been conducted that has investigated the effect of internal corporate governance regulations on various dimensions of financial reporting quality, and the results of this research can represent the results of the efforts that have been made to formulate corporate governance regulations. In this research, earnings management through accrual management and real earnings management have been considered. Also, to measure real earnings management, real earnings management based on manipulation of production costs, discretionary expenses, and operational cash flows has been used. Based on the above, research hypothesis are: 1) Announcement of corporate governance guidelines has a significant negative impact on earnings management based on the manipulation of accruals. 2) Announcement of corporate governance guidelines has a significant negative impact on real earnings management based on the manipulation of abnormal production costs. 3) Announcement of the corporate governance guidelines has a significant negative impact on the real earnings management based on the manipulation of abnormal discretionary expenses. 4) Announcement of corporate governance guidelines has a significant negative impact on real earnings management based on the manipulation of abnormal operating cash flow. Research Methodology This research is placed in the category of applied research; Because its basic purpose is to find solutions for existing problems and current conditions. Secondary data is usually used to conduct this type of research. In this research, the researcher describes the nature of the topic in question. Therefore, it is a type of descriptive research. Also, the current research can be considered correlational research; Because it examines the relationship between variables and their explanation. In general, to conduct any research, two types of information are needed: the library part and the experimental part; In this research, to collect library and experimental information, books, magazines and specialized articles, financial statements, explanatory notes, as well as existing information banks, such as Rahvard Novin, Codal and the stock exchange website, were used respectively. The software used to test all the models of this research is the 9th version of EViews. The statistical population of this research is all the companies admitted to the Tehran Stock Exchange during the years 2014 to 2021. The sample was selected from among the companies listed in the Tehran Stock Exchange using some criteria. According to the criteria, among all the companies listed in the Tehran Stock Exchange, 117 companies were considered as the investigated companies in this research. Conclusion and discussion The results of testing the hypotheses of this research showed that none of the hypotheses examined in this research were rejected and the announcement of corporate governance guidelines affects earnings management (accrual earnings management and real earnings management based on the manipulation of production costs, discretionary expenses, and operating cash flows). It has had a significant negative effect and has led to the reduction of managers' opportunistic manipulations. Based on the result of the first hypothesis, the announcement of the corporate governance guidelines of the Stock Exchange and Securities Organization has led to the reduction of earnings management based on accruals. In the interpretation of this result, it can be said that the requirements contained in the mentioned instructions to strengthen the corporate governance mechanisms at the level of capital market companies have been able to reduce the possible motivation of managers to manipulate earnings by using allowed accounting procedures and through accruals and therefore, it seems that with the help of this guidelines, the capital market supervisory body has been able to reach its final goal, which is to support the stockholders, especially the shareholders. In other words, the recent requirements of corporate governance have succeeded in improving the quality of financial reporting and the quality of companies' earnings, and this promises investors that they can make decisions regarding their investment options in the capital market with more trust and confidence in the financial reports of companies. According to the results of the second to fourth hypotheses of this research, it can be said that the establishment of corporate governance requirements in Iran's capital market has led to a decrease in real earnings management through the manipulation of production costs, discretionary expenses, and operating cash flows. In this regard, as it was stated in some previous research, the establishment of disclosure requirements and regulations and corporate governance has led to the change of earnings management procedures from the management of accruals to the real management of earnings; This is while, based on the results of this research, the implementation of corporate governance mechanisms has had significant negative effects on the real earnings management. Among the reasons for this, it can be mentioned that in the existing corporate governance rules, the subject of transactions with related parties, which is one of the tools used for real earnings management, has been given special attention. Also, in the third chapter of the corporate governance guidelines, the necessary characteristics for the members of the board of directors and the CEO have been described, that they must have the necessary education and experience and have no definite criminal or disciplinary convictions subject to the laws and regulations of the capital market, and it seems that with these requirements, relatively more knowledgeable managers have played a role in the board of directors of companies and have been able to reduce the motivation of executive managers to manipulate the real activities of the company in the direction of real earnings management. According to the results of this research and considering the inhibiting effects of the implementation of corporate governance on the earnings management of companies, it is suggested that supervisory institutions such as the Securities and Exchange Organization as a supervisory institution for companies have more supervision and control over the implementation of corporate governance principles and related regulations; Because the results of this research have shown that establishing these criteria can reduce the opportunistic actions of managers. It is also suggested to provide the conditions for improving the ability and skills of the members of the board of directors by holding continuous training sessions about the implementation of the corporate governance guidelines of the Securities and Exchange Organization. In addition, creditors, shareholders, and investors are suggested to take into account the degree of compliance with the corporate governance guidelines in reviewing the company's situation and making their decisions; Because better compliance with this instruction reduces the possibility of earnings management behavior based on accruals and real earnings management in companies. Based on the results of this research, future researchers are suggested to investigate the effect of the announcement of corporate governance rules on the quality of financial statements and reports as well as the quality of internal control reports of companies. Also, considering the relationship between corporate governance and independent auditors, it is suggested to pay attention to the impact of the notification of the mentioned rules on the audit quality. In addition, a comparative study of the hypotheses of this research by industries is recommended.

https://far.ui.ac.ir/article_28482_2183a213e44e39decf930c790028b1a9.pdf

University of Isfahan Financial Accounting Research 2322-3405 16 1 2024 11 21 Investigating the Mediating Effect of Credit Rating on the Relationship between Corporate Governance Quality and Stock Liquidity based on the Composite Liquidity Approach Investigating the Mediating Effect of Credit Rating on the Relationship between Corporate Governance Quality and Stock Liquidity based on the Composite Liquidity Approach 27 50 28912 10.22108/far.2024.141603.2048 FA Amin Pourrezaei Nav M.A of Accounting, Faculty of Economics and Management, Urmia University, Urmia, Iran. Hamzeh Didar Associate Professor of Accounting, Faculty of Economics and Management, Urmia University, Urmia, Iran. Farzad Ghayour Assistant Professor of Accounting, Faculty of Economics and Management, Urmia University, Urmia, Iran. Journal Article 2024 06 01 Considering that one of the factors influencing credit ratings is the quality of corporate governance and that credit ratings affect stock liquidity in the capital market by influencing investors' decisions, this study aims to investigate the mediating effect of credit ratings on the relationship between corporate governance quality and stock liquidity over 10 years from 2013 to 2022. In this regard, for the first time in Iran, a composite liquidity index was used to calculate stock liquidity. The data collection method involved document analysis and reference to databases, and the data analysis method was inferential. To test the research hypotheses, a panel data model was used. Emphasizing the reverse structure of the composite liquidity measure, the findings of the study indicated that corporate governance quality has a positive and significant impact on stock liquidity and that credit ratings play a partial mediating role in the relationship between corporate governance quality and stock liquidity. Introduction The purpose of this study was to investigate the mediating effect of credit rating on the relationship between the quality of corporate governance and stock liquidity. In this regard, it was first noted that the existence of a highly liquid market is important and necessary to encourage and attract investors to transfer wealth to such markets. This is because one of the key drivers of any country's economy is its capital market, and a crucial factor in these markets is stock liquidity. Therefore, understanding the factors that contribute to the creation of a highly liquid market is of great importance. Research literature indicates that information asymmetry is a phenomenon that reduces the level of awareness among market participants. In such cases, investors cannot accurately assess the value of a company's shares and make rational decisions to buy or sell them. Additionally, it has been noted that accounting information alone cannot adequately evaluate a company's performance or serve as a reliable basis for investors' decisions. In this context, corporate governance is presented as a set of relationships between the company's management, the board of directors, shareholders, and other stakeholders. It is argued that corporate governance, by improving company performance, significantly enhances the quality of information provided to the market and, by reducing information asymmetry, increases stock liquidity. Moreover, the advantages of rating institutions have been examined both theoretically and empirically. It has been stated that these institutions, by accessing confidential information and transferring it to the market in the form of credit ratings, can influence investors' decision-making. Additionally, corporate governance is recognized as an influential factor in the credit rating process. Methods & Material This research is applied in nature and employs multivariate regression analysis to examine the relationship between the study variables. The research methodology is of an ex post facto type. Additionally, since it aims to evaluate the relationship between two or more variables, it is descriptive-correlational in nature. Based on the criteria applied for selecting the statistical sample, 101 companies were chosen for the period from 2013 to 2022 to test the hypotheses. Data analysis was conducted using Stata and EViews software. Finding The results indicate the presence of an inverse and significant relationship between the quality of corporate governance and credit rating with the composite liquidity criterion. Considering the inverse structure of the composite liquidity index and the negative and significant relationship between the quality of corporate governance and credit rating with this index, i.e., composite liquidity, it can be concluded that higher corporate governance quality scores and, consequently, higher credit ratings are associated with higher share liquidity. Conversely, lower governance quality scores and credit ratings correspond to lower share liquidity. The obtained results indicate that credit rating as a mediating variable is a partial mediating factor in the relationship between the quality of corporate governance and stock liquidity. In this way, the third hypothesis of the research is confirmed, and the quality of corporate governance has both a direct and an indirect effect on the liquidity of stocks. It can be said that the quality of corporate governance in companies with a high credit rating increases the liquidity of the companies' shares. Disscussion and Conclusion The results indicate that credit rating, as a mediating variable, is a partial mediator in the relationship between the quality of corporate governance and stock liquidity. Based on the findings, it can be stated that corporate governance directly influences the liquidity of a company's shares. Additionally, by achieving a higher credit rating, corporate governance indirectly encourages investors to buy and sell the company's shares, thereby increasing their liquidity. Considering that one of the factors influencing credit ratings is the quality of corporate governance and that credit ratings affect stock liquidity in the capital market by influencing investors' decisions, this study aims to investigate the mediating effect of credit ratings on the relationship between corporate governance quality and stock liquidity over 10 years from 2013 to 2022. In this regard, for the first time in Iran, a composite liquidity index was used to calculate stock liquidity. The data collection method involved document analysis and reference to databases, and the data analysis method was inferential. To test the research hypotheses, a panel data model was used. Emphasizing the reverse structure of the composite liquidity measure, the findings of the study indicated that corporate governance quality has a positive and significant impact on stock liquidity and that credit ratings play a partial mediating role in the relationship between corporate governance quality and stock liquidity. Introduction The purpose of this study was to investigate the mediating effect of credit rating on the relationship between the quality of corporate governance and stock liquidity. In this regard, it was first noted that the existence of a highly liquid market is important and necessary to encourage and attract investors to transfer wealth to such markets. This is because one of the key drivers of any country's economy is its capital market, and a crucial factor in these markets is stock liquidity. Therefore, understanding the factors that contribute to the creation of a highly liquid market is of great importance. Research literature indicates that information asymmetry is a phenomenon that reduces the level of awareness among market participants. In such cases, investors cannot accurately assess the value of a company's shares and make rational decisions to buy or sell them. Additionally, it has been noted that accounting information alone cannot adequately evaluate a company's performance or serve as a reliable basis for investors' decisions. In this context, corporate governance is presented as a set of relationships between the company's management, the board of directors, shareholders, and other stakeholders. It is argued that corporate governance, by improving company performance, significantly enhances the quality of information provided to the market and, by reducing information asymmetry, increases stock liquidity. Moreover, the advantages of rating institutions have been examined both theoretically and empirically. It has been stated that these institutions, by accessing confidential information and transferring it to the market in the form of credit ratings, can influence investors' decision-making. Additionally, corporate governance is recognized as an influential factor in the credit rating process. Methods & Material This research is applied in nature and employs multivariate regression analysis to examine the relationship between the study variables. The research methodology is of an ex post facto type. Additionally, since it aims to evaluate the relationship between two or more variables, it is descriptive-correlational in nature. Based on the criteria applied for selecting the statistical sample, 101 companies were chosen for the period from 2013 to 2022 to test the hypotheses. Data analysis was conducted using Stata and EViews software. Finding The results indicate the presence of an inverse and significant relationship between the quality of corporate governance and credit rating with the composite liquidity criterion. Considering the inverse structure of the composite liquidity index and the negative and significant relationship between the quality of corporate governance and credit rating with this index, i.e., composite liquidity, it can be concluded that higher corporate governance quality scores and, consequently, higher credit ratings are associated with higher share liquidity. Conversely, lower governance quality scores and credit ratings correspond to lower share liquidity. The obtained results indicate that credit rating as a mediating variable is a partial mediating factor in the relationship between the quality of corporate governance and stock liquidity. In this way, the third hypothesis of the research is confirmed, and the quality of corporate governance has both a direct and an indirect effect on the liquidity of stocks. It can be said that the quality of corporate governance in companies with a high credit rating increases the liquidity of the companies' shares. Disscussion and Conclusion The results indicate that credit rating, as a mediating variable, is a partial mediator in the relationship between the quality of corporate governance and stock liquidity. Based on the findings, it can be stated that corporate governance directly influences the liquidity of a company's shares. Additionally, by achieving a higher credit rating, corporate governance indirectly encourages investors to buy and sell the company's shares, thereby increasing their liquidity.

https://far.ui.ac.ir/article_28912_c6472c49c63e66fcc9b1a3fb263be1b4.pdf

University of Isfahan Financial Accounting Research 2322-3405 16 1 2024 11 21 Peer Effects in Corporate Disclosure Decisions Mohammad Hossein Safarzadeh*: Associate professor of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. Peer Effects in Corporate Disclosure Decisions Mohammad Hossein Safarzadeh*: Associate professor of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. 51 86 29152 10.22108/far.2024.141449.2047 FA Mohammad Hossein Safarzadeh Associate professor of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. Hamideh Asnaashari Assistant professor of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. Alireza Panahalipour Master of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. Journal Article 2024 05 11 Information disclosure is considered one of the most important aspects of corporate performance and decision-making. Managers' decisions regarding the extent and manner of information disclosure will have a significant impact on the decision-making of other market players. The purpose of this research is to investigate the effect of information disclosure by peer companies on managers' decision-making regarding the level of disclosure of companies listed on the Tehran Stock Exchange. The moderating role of reliance on external financing is also examined. The research method combines deductive and inductive approaches, and data from 113 companies over 10 years have been studied. The results showed that information disclosure by peer companies has a positive and significant effect on the disclosure of the companies under study. These results indicate that the information published by peers acts as a driver for increased corporate disclosure. Regarding the moderating role of reliance on external financing in the relationship between peer disclosure and corporate disclosure, the results showed that this factor does not have a significant effect on this relationship. Therefore, this feature does not have a significant impact on the effect of peers on corporate disclosure. Introduction The disclosure of information is considered one of the most important aspects of corporate performance and decision-making. This concept refers to how companies convey essential financial and non-financial information to stakeholders, including investors, regulatory bodies, and the public. Management decisions regarding the scope and manner of information disclosure significantly influence the decision-making processes of other market participants, affecting everything from investment strategies to perceptions of corporate value. In today's competitive environment, transparency and accountability have emerged as critical topics, as stakeholders increasingly demand a deeper understanding of corporate operations and governance. Despite extensive research on corporate disclosure policies, the role of peer companies in disclosure is often overlooked. Peer companies can serve as benchmarks for comparison and sources of competitive pressure, shaping how companies relate to their performance and prospects. This study aims to fill this gap by examining the impact of information disclosure by peer companies on management decisions regarding the level of information disclosure in companies listed on the Tehran Stock Exchange. Understanding how peer companies influence disclosure practices can provide valuable insights into corporate governance dynamics and market behavior. Furthermore, the moderating role of external financing dependence in the relationship between peer disclosure and corporate disclosure will also be explored. Methodology The present research is considered a fundamental study in terms of purpose. The research method was a combination of comparative and inductive methods. The statistical population consisted of 113 companies listed on the Tehran Stock Exchange, which were studied over 10 years from 2012 to 2021. The required data included financial and non-financial information extracted from the financial statements and board of directors' reports of the companies. The data collection method was library and documentary, and the data were collected in a combined (cross-sectional-time series) manner. To identify peer effects, Manski's (1993) model is employed. Linear multivariate regression models, along with the two-stage least squares method using average idiosyncratic equity returns of peer firms in the same industry (Pshock) as the instrumental variable, were used to analyze the data and test the research hypotheses. Statistical analyses were performed using EViews software. Findings Effect of peer information disclosure on corporate disclosure: The results of the analysis showed that information disclosure by peer companies has a significant positive effect on the disclosure of the companies under study. These results indicate that the information published by peers acts as an incentive for greater disclosure by companies. The moderating role of dependence on external financing: Regarding the moderating role of dependence on external financing in the relationship between peer disclosure and corporate disclosure, the results showed that this factor does not have a significant effect on this relationship. In other words, greater or lesser dependence on external financing does not affect the role of peer companies in corporate disclosure. Conclusion This study shows that information disclosure by peer companies can have a positive effect on the disclosure of other companies' information. With increased transparency of information by peers, companies move towards greater disclosure. This is because reduced external uncertainty and increased accuracy of management's private information encourage the company to disclose more. Additionally, dependence on external financing does not play a significant role in this relationship, and therefore this characteristic does not have a significant impact on the influence of peers on corporate disclosure. Possible reasons for this include the collateral-based nature of financing in Iran, which leads creditors and investors to focus more on the value of collateral rather than the disclosed financial information. Moreover, the specific economic conditions during the period from 2018 to 2020, characterized by an influx of liquidity into the capital market and a decrease in financing costs, enabled companies to attract capital easily, even without full disclosure of information. In this context, investors may pay less attention to the details of the disclosed information and be more influenced by the overall market sentiment. These factors may explain the lack of enhancement in the effect of peer information disclosure in conditions of greater dependence on external financing. Information disclosure is considered one of the most important aspects of corporate performance and decision-making. Managers' decisions regarding the extent and manner of information disclosure will have a significant impact on the decision-making of other market players. The purpose of this research is to investigate the effect of information disclosure by peer companies on managers' decision-making regarding the level of disclosure of companies listed on the Tehran Stock Exchange. The moderating role of reliance on external financing is also examined. The research method combines deductive and inductive approaches, and data from 113 companies over 10 years have been studied. The results showed that information disclosure by peer companies has a positive and significant effect on the disclosure of the companies under study. These results indicate that the information published by peers acts as a driver for increased corporate disclosure. Regarding the moderating role of reliance on external financing in the relationship between peer disclosure and corporate disclosure, the results showed that this factor does not have a significant effect on this relationship. Therefore, this feature does not have a significant impact on the effect of peers on corporate disclosure. Introduction The disclosure of information is considered one of the most important aspects of corporate performance and decision-making. This concept refers to how companies convey essential financial and non-financial information to stakeholders, including investors, regulatory bodies, and the public. Management decisions regarding the scope and manner of information disclosure significantly influence the decision-making processes of other market participants, affecting everything from investment strategies to perceptions of corporate value. In today's competitive environment, transparency and accountability have emerged as critical topics, as stakeholders increasingly demand a deeper understanding of corporate operations and governance. Despite extensive research on corporate disclosure policies, the role of peer companies in disclosure is often overlooked. Peer companies can serve as benchmarks for comparison and sources of competitive pressure, shaping how companies relate to their performance and prospects. This study aims to fill this gap by examining the impact of information disclosure by peer companies on management decisions regarding the level of information disclosure in companies listed on the Tehran Stock Exchange. Understanding how peer companies influence disclosure practices can provide valuable insights into corporate governance dynamics and market behavior. Furthermore, the moderating role of external financing dependence in the relationship between peer disclosure and corporate disclosure will also be explored. Methodology The present research is considered a fundamental study in terms of purpose. The research method was a combination of comparative and inductive methods. The statistical population consisted of 113 companies listed on the Tehran Stock Exchange, which were studied over 10 years from 2012 to 2021. The required data included financial and non-financial information extracted from the financial statements and board of directors' reports of the companies. The data collection method was library and documentary, and the data were collected in a combined (cross-sectional-time series) manner. To identify peer effects, Manski's (1993) model is employed. Linear multivariate regression models, along with the two-stage least squares method using average idiosyncratic equity returns of peer firms in the same industry (Pshock) as the instrumental variable, were used to analyze the data and test the research hypotheses. Statistical analyses were performed using EViews software. Findings Effect of peer information disclosure on corporate disclosure: The results of the analysis showed that information disclosure by peer companies has a significant positive effect on the disclosure of the companies under study. These results indicate that the information published by peers acts as an incentive for greater disclosure by companies. The moderating role of dependence on external financing: Regarding the moderating role of dependence on external financing in the relationship between peer disclosure and corporate disclosure, the results showed that this factor does not have a significant effect on this relationship. In other words, greater or lesser dependence on external financing does not affect the role of peer companies in corporate disclosure. Conclusion This study shows that information disclosure by peer companies can have a positive effect on the disclosure of other companies' information. With increased transparency of information by peers, companies move towards greater disclosure. This is because reduced external uncertainty and increased accuracy of management's private information encourage the company to disclose more. Additionally, dependence on external financing does not play a significant role in this relationship, and therefore this characteristic does not have a significant impact on the influence of peers on corporate disclosure. Possible reasons for this include the collateral-based nature of financing in Iran, which leads creditors and investors to focus more on the value of collateral rather than the disclosed financial information. Moreover, the specific economic conditions during the period from 2018 to 2020, characterized by an influx of liquidity into the capital market and a decrease in financing costs, enabled companies to attract capital easily, even without full disclosure of information. In this context, investors may pay less attention to the details of the disclosed information and be more influenced by the overall market sentiment. These factors may explain the lack of enhancement in the effect of peer information disclosure in conditions of greater dependence on external financing.

https://far.ui.ac.ir/article_29152_1402b6c89abb3eee12771f57d063d21e.pdf

University of Isfahan Financial Accounting Research 2322-3405 16 1 2024 11 21 The Relationship between Managers’ Overconfidence and Dividend Stickiness: The Moderating Role of Catering Incentives The Relationship between Managers’ Overconfidence and Dividend Stickiness: The Moderating Role of Catering Incentives 87 108 29110 10.22108/far.2024.143017.2072 FA Abbas Aflatooni Associate Professor, Department of Accounting, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamadan, Iran. Journal Article 2024 10 11 The phenomenon of dividend stickiness has recently attracted significant attention from researchers. However, limited domestic studies are addressing this issue. This study aims to better understand the various aspects of this phenomenon by examining the relationship between managers' overconfidence and dividend stickiness, as well as the effect of firms' catering incentives on this relationship. Utilizing data from 143 firms listed on the Tehran Stock Exchange between 2012 and 2023 (1,716 observations), this research employs a Logit regression approach with the maximum likelihood estimator, controlling for fixed effects of years and industries. The findings confirm the existence of dividend stickiness and reveal a positive and significant relationship between managers' overconfidence and dividend stickiness. Furthermore, the results indicate that an increase in firms' catering incentives weakens this relationship. Robustness tests, which include controls for macroeconomic variables and the impact of the COVID-19 pandemic using the ordered logit model and an alternative measure for the moderating variable, support the main findings and align with the concepts proposed in the Catering theory. Introduction Building upon Lintner's (1956) seminal research on dividend stickiness, various researchers have extensively explored this phenomenon (Lintner, 1956; Brav et al., 2005). Three primary explanations have been proposed to account for this phenomenon. First, dividends serve as a channel for transmitting a firm's private information (Guttman et al., 2010; Baker et al., 2016). Second, firms with stronger regulatory mechanisms or those exposed to greater agency conflicts tend to smooth dividends more (Leary & Michaely, 2011; Javakhadze et al., 2014). Third, investor preference for dividend payments encourages managers to cater to shareholders by providing dividends (Larkin et al., 2017). However, empirical evidence remains limited regarding how much differences in dividend stickiness among firms can be attributed to managerial beliefs (Deshmukh et al., 2013; Wrońska-Bukalska, 2018). Consequently, the present study aims to investigate the dividend stickiness phenomenon in Iranian firms, examine the relationship between managers' overconfidence and dividend stickiness, and assess the impact of catering incentives on the relationship between managers' overconfidence and dividend stickiness. Methods & Material Data collection for this study was conducted using the Rahvard Novin database, the Codal website, and the Central Bank of Iran. Data analysis was performed using Stata software. The research models were estimated via Logit regression with the maximum likelihood estimator, controlling for fixed effects of years and industries. To address potential heteroscedasticity and correlation among error terms, cluster-robust standard errors were applied at the firm level. To ensure robustness to model specification and the moderator variable’s definition, robustness tests were conducted using the Ordered-Logit regression with a decile-ranked dependent variable, and the moderator variable was calculated differently. The study's population consists of 143 firms during 2012-2023 (1,716 firm-years) across 11 industries. Data from the previous three periods (2009-2011) were used to assess the values of some variables. To handle outliers, all continuous variables were winsorized at the 1st and 99th percentiles. Findings The results of this study reveal a positive and significant coefficient for the variable H_Capex, indicating that firms with high capital expenditures are more likely to exhibit dividend stickiness compared to other firms. Additionally, the positive and significant coefficient of the Over_Invest variable suggests that firms displaying over-investment behavior are more prone to dividend stickiness. These findings demonstrate a positive and significant relationship between managers' overconfidence and dividend stickiness, confirming that the first hypothesis of the research is not rejected. Furthermore, the negative and significant coefficient of the H_Capex×DP_firm indicates that an increase in catering incentives weakens the positive relationship between high capital expenditures and dividend stickiness. Similarly, the negative and significant coefficient of the Over_Invest×DP_firm shows that an increase in catering incentives weakens the positive relationship between over-investment and dividend stickiness. These results suggest that an increase in catering incentives mitigates the relationship between managers' overconfidence and dividend stickiness, leading to the non-rejection of the second hypothesis. The research findings remain robust when controlling for the effects of macroeconomic variables, the impact of the COVID-19 pandemic, the use of the ordered logit model, and an alternative measure for moderating variable. Conclusion & Results The phenomenon of dividend stickiness has garnered attention from researchers in recent years, yet despite its significance, it has received limited attention in domestic research. This study investigates the existence of dividend stickiness in Iranian firms, examines the relationship between managers' overconfidence and dividend stickiness, and assesses the impact of catering incentives on this relationship. The research findings demonstrate that dividend stickiness is prevalent among Iranian firms, aligning with the findings of Beshkooh and Moharram Khani (2020). Furthermore, the results indicate that the phenomenon of dividend stickiness is more observable in firms with overconfident managers and that the relationship between managers' overconfidence and dividend stickiness weakens with an increase in catering incentives. These results, consistent with the findings of Baker and Wurgler (2004) and Lin and Yu (2023), align with the concepts proposed in the catering theory. The phenomenon of dividend stickiness has recently attracted significant attention from researchers. However, limited domestic studies are addressing this issue. This study aims to better understand the various aspects of this phenomenon by examining the relationship between managers' overconfidence and dividend stickiness, as well as the effect of firms' catering incentives on this relationship. Utilizing data from 143 firms listed on the Tehran Stock Exchange between 2012 and 2023 (1,716 observations), this research employs a Logit regression approach with the maximum likelihood estimator, controlling for fixed effects of years and industries. The findings confirm the existence of dividend stickiness and reveal a positive and significant relationship between managers' overconfidence and dividend stickiness. Furthermore, the results indicate that an increase in firms' catering incentives weakens this relationship. Robustness tests, which include controls for macroeconomic variables and the impact of the COVID-19 pandemic using the ordered logit model and an alternative measure for the moderating variable, support the main findings and align with the concepts proposed in the Catering theory. Introduction Building upon Lintner's (1956) seminal research on dividend stickiness, various researchers have extensively explored this phenomenon (Lintner, 1956; Brav et al., 2005). Three primary explanations have been proposed to account for this phenomenon. First, dividends serve as a channel for transmitting a firm's private information (Guttman et al., 2010; Baker et al., 2016). Second, firms with stronger regulatory mechanisms or those exposed to greater agency conflicts tend to smooth dividends more (Leary & Michaely, 2011; Javakhadze et al., 2014). Third, investor preference for dividend payments encourages managers to cater to shareholders by providing dividends (Larkin et al., 2017). However, empirical evidence remains limited regarding how much differences in dividend stickiness among firms can be attributed to managerial beliefs (Deshmukh et al., 2013; Wrońska-Bukalska, 2018). Consequently, the present study aims to investigate the dividend stickiness phenomenon in Iranian firms, examine the relationship between managers' overconfidence and dividend stickiness, and assess the impact of catering incentives on the relationship between managers' overconfidence and dividend stickiness. Methods & Material Data collection for this study was conducted using the Rahvard Novin database, the Codal website, and the Central Bank of Iran. Data analysis was performed using Stata software. The research models were estimated via Logit regression with the maximum likelihood estimator, controlling for fixed effects of years and industries. To address potential heteroscedasticity and correlation among error terms, cluster-robust standard errors were applied at the firm level. To ensure robustness to model specification and the moderator variable’s definition, robustness tests were conducted using the Ordered-Logit regression with a decile-ranked dependent variable, and the moderator variable was calculated differently. The study's population consists of 143 firms during 2012-2023 (1,716 firm-years) across 11 industries. Data from the previous three periods (2009-2011) were used to assess the values of some variables. To handle outliers, all continuous variables were winsorized at the 1st and 99th percentiles. Findings The results of this study reveal a positive and significant coefficient for the variable H_Capex, indicating that firms with high capital expenditures are more likely to exhibit dividend stickiness compared to other firms. Additionally, the positive and significant coefficient of the Over_Invest variable suggests that firms displaying over-investment behavior are more prone to dividend stickiness. These findings demonstrate a positive and significant relationship between managers' overconfidence and dividend stickiness, confirming that the first hypothesis of the research is not rejected. Furthermore, the negative and significant coefficient of the H_Capex×DP_firm indicates that an increase in catering incentives weakens the positive relationship between high capital expenditures and dividend stickiness. Similarly, the negative and significant coefficient of the Over_Invest×DP_firm shows that an increase in catering incentives weakens the positive relationship between over-investment and dividend stickiness. These results suggest that an increase in catering incentives mitigates the relationship between managers' overconfidence and dividend stickiness, leading to the non-rejection of the second hypothesis. The research findings remain robust when controlling for the effects of macroeconomic variables, the impact of the COVID-19 pandemic, the use of the ordered logit model, and an alternative measure for moderating variable. Conclusion & Results The phenomenon of dividend stickiness has garnered attention from researchers in recent years, yet despite its significance, it has received limited attention in domestic research. This study investigates the existence of dividend stickiness in Iranian firms, examines the relationship between managers' overconfidence and dividend stickiness, and assesses the impact of catering incentives on this relationship. The research findings demonstrate that dividend stickiness is prevalent among Iranian firms, aligning with the findings of Beshkooh and Moharram Khani (2020). Furthermore, the results indicate that the phenomenon of dividend stickiness is more observable in firms with overconfident managers and that the relationship between managers' overconfidence and dividend stickiness weakens with an increase in catering incentives. These results, consistent with the findings of Baker and Wurgler (2004) and Lin and Yu (2023), align with the concepts proposed in the catering theory.

https://far.ui.ac.ir/article_29110_4f467c6c1c00e8c944f15753b7fb128b.pdf

University of Isfahan Financial Accounting Research 2322-3405 16 1 2024 11 21 The Impact of Managerial Overconfidence on Expenses Classification Shifting: The Moderating Role of Comparability of Financial Statements The Impact of Managerial Overconfidence on Expenses Classification Shifting: The Moderating Role of Comparability of Financial Statements 109 130 29045 10.22108/far.2024.142152.2058 FA Farshid Riahi Dorcheh Master of Financial Management, Shahrekord Branch, Islamic Azad University, Shahrekord, Iran Iraj Torabi Assistant Professor, Department of Accounting, Shahrekord Branch, Islamic Azad University, Shahrekord, Iran Journal Article 2024 07 14 Abstract Expenses classification shifting significantly compromises the quality of core earnings, resulting in misleading information about firms’ core and sustainable performance. Classification shifting can be a direct and unintentional consequence of overconfident CEOs’ cognitive bias. Also, overconfident CEOs might consciously and intentionally misclassify recurring expenses as nonrecurring items to inflate core earnings; however, if the firms’ financial statements are more comparable to those of their industry peers, stronger monitoring leads to fewer opportunities to manage earnings. The purpose of the present study is to investigate the impact of managerial overconfidence on expense classification shifting based on the moderating role of the comparability of financial statements. The sample consists of 130 companies in the period 2015-2022. The results showed that managers' overconfidence leads to increased expense classification shifting and a piecemeal decrease in classification shifting over time. In addition, the comparability of financial statements is an obstacle to managers' overconfidence in expense classification shifting and their piecemeal reduction over time. Therefore, the market participants should pay serious attention to the overconfident CEOs’ and the comparability of financial statements to expense classification shifting. Key words: Expenses Classification Shifting, Managerial Overconfidence, Comparability of Financial Statements. Introduction A stream of research shows that managers purposely classify essentially persistent expenses in the special items category and engage in classification shifting. Classification shifting differs from accruals and real earnings management in that it is a less costly earnings management tool that inflates the core performance of the firm and misleads investors about the firm’s sustainable core profitability. Prior studies on classification shifting focus mainly on firm-level factors and little is known about whether executive attributes are associated with firms’ propensity to engage in classification shifting. Our study fills this void by investigating whether and how an important individual characteristic, CEO overconfidence, is associated with classification shifting. In this regard, considering the opportunities for earnings manipulation, the comparability of financial statements may also play a role in the relationship of Managerial Overconfidence and Expenses Classification Shifting. Also, this research adds to the body of literature probing the financial reporting quality of firms with overconfident managers. Methods & Material The statistical population in this research is all the companies listed on Tehran Stock Exchange and the period under investigation is from 2015 to 2022. In this research, the systematic elimination method was used to reach the sample, and 130 companies were selected as the research sample. The research model is estimated through panel data by controlling the effects of industry and year by ordinary least squares method with robust standard error. Finding The findings of the first hypothesis show that managers' overconfidence leads to an increase in expense classification shifting and a piecemeal decrease in classification shifting over time. In addition, the findings of the second hypothesis show that the comparability of financial statements is an obstacle to managers' overconfidence in expense classification shifting and their piecemeal reduction over time. Conclusion & Results In this study, the association between an important behavioral attribute of CEOs, managerial overconfidence, and the occurrence of classification shifting has been investigated. The findings showed that managerial overconfidence is related to an increase in unexpected core earnings via reclassifying recurring expenses to special items and that the association between managerial overconfidence and classification shifting is more evident for firms whose financial statements are more comparable with their peers in the industry because stronger monitoring leads to fewer opportunities to manage earnings. The evidence shows that increased financial comparability can mitigate the effects of managerial overconfidence on classification shifting. Together, these results suggest that overconfident CEOs intentionally engage in classification shifting and inflate core earnings, and this relation is more pronounced when CEOs have strong incentives and more opportunities to engage in misconduct. This study provides evidence that an important managerial attribute of CEOs, overconfidence, plays a significant role in explaining firms’ practice of classification shifting, and that classification shifting conducted by overconfident CEOs is driven by intended actions rather than unintentional behavior. Thus, the results suggest that regulators should also pay attention to the practice of classification shifting, considering the management style of CEOs. Abstract Expenses classification shifting significantly compromises the quality of core earnings, resulting in misleading information about firms’ core and sustainable performance. Classification shifting can be a direct and unintentional consequence of overconfident CEOs’ cognitive bias. Also, overconfident CEOs might consciously and intentionally misclassify recurring expenses as nonrecurring items to inflate core earnings; however, if the firms’ financial statements are more comparable to those of their industry peers, stronger monitoring leads to fewer opportunities to manage earnings. The purpose of the present study is to investigate the impact of managerial overconfidence on expense classification shifting based on the moderating role of the comparability of financial statements. The sample consists of 130 companies in the period 2015-2022. The results showed that managers' overconfidence leads to increased expense classification shifting and a piecemeal decrease in classification shifting over time. In addition, the comparability of financial statements is an obstacle to managers' overconfidence in expense classification shifting and their piecemeal reduction over time. Therefore, the market participants should pay serious attention to the overconfident CEOs’ and the comparability of financial statements to expense classification shifting. Key words: Expenses Classification Shifting, Managerial Overconfidence, Comparability of Financial Statements. Introduction A stream of research shows that managers purposely classify essentially persistent expenses in the special items category and engage in classification shifting. Classification shifting differs from accruals and real earnings management in that it is a less costly earnings management tool that inflates the core performance of the firm and misleads investors about the firm’s sustainable core profitability. Prior studies on classification shifting focus mainly on firm-level factors and little is known about whether executive attributes are associated with firms’ propensity to engage in classification shifting. Our study fills this void by investigating whether and how an important individual characteristic, CEO overconfidence, is associated with classification shifting. In this regard, considering the opportunities for earnings manipulation, the comparability of financial statements may also play a role in the relationship of Managerial Overconfidence and Expenses Classification Shifting. Also, this research adds to the body of literature probing the financial reporting quality of firms with overconfident managers. Methods & Material The statistical population in this research is all the companies listed on Tehran Stock Exchange and the period under investigation is from 2015 to 2022. In this research, the systematic elimination method was used to reach the sample, and 130 companies were selected as the research sample. The research model is estimated through panel data by controlling the effects of industry and year by ordinary least squares method with robust standard error. Finding The findings of the first hypothesis show that managers' overconfidence leads to an increase in expense classification shifting and a piecemeal decrease in classification shifting over time. In addition, the findings of the second hypothesis show that the comparability of financial statements is an obstacle to managers' overconfidence in expense classification shifting and their piecemeal reduction over time. Conclusion & Results In this study, the association between an important behavioral attribute of CEOs, managerial overconfidence, and the occurrence of classification shifting has been investigated. The findings showed that managerial overconfidence is related to an increase in unexpected core earnings via reclassifying recurring expenses to special items and that the association between managerial overconfidence and classification shifting is more evident for firms whose financial statements are more comparable with their peers in the industry because stronger monitoring leads to fewer opportunities to manage earnings. The evidence shows that increased financial comparability can mitigate the effects of managerial overconfidence on classification shifting. Together, these results suggest that overconfident CEOs intentionally engage in classification shifting and inflate core earnings, and this relation is more pronounced when CEOs have strong incentives and more opportunities to engage in misconduct. This study provides evidence that an important managerial attribute of CEOs, overconfidence, plays a significant role in explaining firms’ practice of classification shifting, and that classification shifting conducted by overconfident CEOs is driven by intended actions rather than unintentional behavior. Thus, the results suggest that regulators should also pay attention to the practice of classification shifting, considering the management style of CEOs.

https://far.ui.ac.ir/article_29045_3a256ec1a2a56189c4e944bcd64c0544.pdf