The Effect of the Level of Firm Growth Rate on the Influence of Information Disclosure on Stock Risk Premium

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Accounting, Faculty of Administrative Science & Economics, University of Isfahan, Isfahan, Iran.

2 Associate Prof., Department of Accounting, Faculty of Administrative Science & Economics, University of Isfahan, Isfahan, Iran.

3 Assistant Prof., Department of Management, Faculty of Administrative Science & Economics, University of Isfahan, Isfahan, Iran.

Abstract

Objective: The purpose of this study is to investigate the effect of the level of firm growth rate on the relationship between voluntary and mandatory disclosure of information and firm stock risk premium.
Methods: The sample of research includes 130 companies listed on the Tehran Stock Exchange from 2010 to 2018. The research results have been separately analyzed at in the period of boom and bust of the capital market. In order to determine the capital market cycle Hudrick-Prieskat filter was used and multivariate regression model and generalized least squares method was used in order to test the main research models and the hypothesis.
Results: The results of the study showed that the level of firm growth rate is effective on the relationship between voluntary disclosure of information and firm stock risk premium, when for information voluntary disclosure from the criteria of management forecast timeliness of midterm earnings (3 months, 6 months and 9 months) and management forecast bias of midterm (3 months, 6 months, 9 months) and annual earnings and for firm stock risk premium from criteria of implied risk premium is used. The results of the study also show that the level of firm growth rate affects relationship between voluntary disclosure of information and firm stock risk premium only in the period of boom and bust of the capital market, when for information voluntary disclosure from the criteria of management forecast bias and accuracy of midterm (3 months, 6 months, 9 months) and annual earnings and for stock risk premium from criteria of risk premium based on the firm characteristics. Regarding the mandatory disclosure of information, the research results indicate the effect of the firm growth rate level on the relationship between mandatory disclosure of information and stock risk premium based firm characteristics at the general level of the sample and the period of boom and bust of the capital market.
Conclusion: Firm growth is an important and influential factor on the relationship between information voluntary and mandatory disclosure and different criteria of stock risk premium. Also, the relationship between information voluntary and mandatory disclosure and different criteria of stock risk premium in the period of boom and bust of the capital market is different. Also, the effect of information voluntary disclosure, compared to mandatory disclosure, on risk premium is different, so that in relation to voluntary disclosure this effect is significant and to mandatory disclosure this effect is less.

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