The relationship between the outside financing and the quality of financial reporting: evidence from Iran

Abstract

Purpose-This study aims to investigate the impact of outside financing (equity and debt financing) on the quality of financial reporting in Iran. Design/methodology/approach-Sample includes the companies listed on the Tehran Stock Exchange-152 companies in a period of four years during 2010-2013. Data were analyzed by using multiple linear regressions with the benefits of the combined data. Findings-The results indicates that there is a positive relationship between the quality of financial reporting based on the qualitative characteristics of the theoretical principles of the Iranian Financial Accounting Standards Board and debt financing. Moreover, there is a negative relationship between the quality of financial reporting based on the Dechow and Dichev (2002) model and debt financing. Additionally, there is a negative relationship between the quality of financial reporting (based on the qualitative characteristics of the theoretical principles of the Iranian Financial Accounting Standards Board as well as the Dechow and Dichev models) and equity financing. Originality/value-Financial statements as the output of the accounting system has always been considered by the investors, the creditors and the government; nonetheless, its dependability in making decisions has always been doubted because of using the accrual principle in the calculation of the reported figure in the statements and, consequently, the possibility of being manipulated by the managers as well as the likelihood of conflict of interest among the managers and the shareholders.

Audit adjustments and corporate financing: evidence from Iran

“…Nonetheless, there is no meaningful relationship between the profit downward audit adjustments and the financing of the firms' future year through the receipt of a loan, which is probably due to the lack of attention of the creditors and banks to such adjustments. The results obtained from the first hypothesis are consistent with the studies of Sormunen (2014), Chen et al (2016), Kardan et al (2016), Anagnostopoulou (2017) and Coffie et al (2018). The existence of moderating clauses in the Independent Auditor's Report negatively affects the decisions of creditors and banks and reduces corporate loans in the current year.…”

“…In another study, Muñoz-Izquierdo et al (2019) proved that an audit report disclosures significantly explain the causes of business failure. Kardan et al (2016) surveyed the association between outside financing and the quality of financial reporting in Iran. Their results showed that there was a positive and significant relationship between the quality of financial reporting and financing through receipt of a loan.…”

The Control Strategies for Information Asymmetry Problems Among Investing Institutions, Investors, and Entrepreneurs in Venture Capital

“…Under ideal circumstances, the ability to invest institutions, funders, and entrepreneurs in venture capital to obtain information is the same. As a result, information asymmetry does not exist (Kardan et al, 2016). However, there are differences among the three parties in the ability to obtain information, and they have different directions and major concerns about information collection.…”

Extended Value-Added Intellectual Coefficient and Financial Reporting Quality: Moderating Role of Global Financial Crisis

“…In addition to, there is an inverse influence between FRQ and innovation (Lobo et al, 2018). Kardan et al (2016) mentioned that FRQ on the basis of qualitative characteristics has a positive influence and on basis of Dechow and Dichev (2002) model, FRQ has an inverse influence on debt financing. Moreover, FRQ has a negative influence on equity financing.…”