Explanatory and Predictive Power of Accounting Information for Share Prices in Tehran Stock Exchange

Authors

1 Professor of Accounting, Shiraz University, Shiraz, Iran.

2 M.A. of Accounting, Shiraz University, Shiraz, Iran.

Abstract

This paper studies the impact of accounting variables include earnings, dividends and book value on share prices and their predictive power for share prices. The main purpose of the study, indicate which of dividends, book value and earnings have more explanatory and predictive power. Hence are survived 159 firms of Tehran Stock Exchange in period 1381-1385. Our methodology of examining the information content of accounting variables is based on cross-sectional regressions of share price on the value measures. The results of the study show that earnings have the most explanatory power and book value has less explanatory power. In the compound model of earnings and book value, "earnings", and in the compound model of dividends and book value, "dividends" rather than "book value", are significant variable in the explanatory power of models.In the all years, except 1384, the explanatory power of the compound model of earnings and book value is more than the compound model of dividends and book value. The explanatory power of the valuation model that includes all three variables (earnings, dividends and book value) is the greatest. Earnings have the most predictive power and book value has less predictive power.

Keywords

References

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Journal of Development and Capital
Volume 2, Issue 2 - Serial Number 4
January 2010
Pages 25-50

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History

  • Receive Date: 21 January 2007
  • Revise Date: 29 November 2008
  • Accept Date: 13 September 2009

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