The Impact of Accrual on the Financial Constraints in Critical Condition, According to Three Fama and French Factor Model by Stock Price Movements Process

Document Type : Research Paper

Authors

1 Ph.D. of Accounting, Najaf Abad branch, University of Islamic Azad, Najaf Abad, Iran.

2 M.A. of Accounting, Khouzestan branch, University of Islamic Azad, Ahwaz, Iran.

10.22103/jdc.2019.8804.1033

Abstract

Objective: The purpose of this study is first to investigate the effect of accruals on financial constraint and to estimate the effect that these items have on financial constraint on the pricing of other stocks.
Method: The statistical population of the study includes all the companies listed in Tehran Stock Exchange during 2007-2016.
Results: Statistics Sample was selected by systematic method over 117 companies. The research method is based on multiple regression with panel data approach.
Conclusion: The research hypotheses were investigated using two objective and auxiliary hypotheses. In other words, the results of the first hypothesis are applied to the second hypothesis. Research evidence suggests that optional accruals have an adverse effect on financial constraint, but non-optional accruals have no effect on financial constraint. Another negative result of the research is the negative role of accruals in critical condition on stock return by considering the trend of stock price movement based on Fama and French three factor model. In fact, companies listed on the Tehran Stock Exchange that have financial constraints cannot use voluntary accruals to show the positive aspects of their activity and are restricted in using it. But companies that use voluntary accruals to mark positive aspects of their market activity compensate for the stock price drop caused by the financial crisis and increase their stock returns in the short run.

Keywords

References

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Journal of Development and Capital
Volume 5, Issue 1 - Serial Number 8
August 2020
Pages 159-185

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History

  • Receive Date: 23 March 2018
  • Revise Date: 16 November 2018
  • Accept Date: 20 October 2019

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