Exploring the Relationship between Disclosure Quality and the Performance of Tehran Stock Exchange Companies Using a Simultaneous Equations System

Document Type : Research Paper

Authors

1 Associate Prof. Accounting, University of Shiraz, Shiraz, Iran

2 PhD. Candidate in Economic, University of Shiraz, Shiraz, Iran

3 MSc in Management, Estahban Payame Noor University, Estahban, Iran

Abstract

The so far studies, reveal a dual relationship between
disclosure quality and firm performance. While some studies have
examined the effects of disclosure quality on firm performance, other
studies have examined the effects of firm performance on disclosure
quality. Reviewing the evidence of the validity of both approaches
means that there is a bilateral (two-sided) relationship between these
two variables. In this regard, the goal of present research is to study
the bilateral relationship between disclosure quality and performance
of 149 companies listed on Tehran Stock Exchange (TSE) during
2004 to 2010. At first, the bilateral relationship between two variables
was confirmed using Granger causality test and then simultaneous
equations system was estimated using two-step regression. Based on
the results, there is bilateral relationship between disclosure quality
and performance of the companies listed on the TSE. In other words,
the results of the simultaneous equation system have more reliability
and validity compared to single-equation system.

Keywords

Accounting and Auditing Review
Volume 21, Issue 3 - Serial Number 3
January 2014
Pages 371-386

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