The Effect of Earnings Quality on the Level of Cash Holdings in Tehran Stock Exchange (in Persian)

Daryoush Foroughi (), Ali Saeedi (), Amir Rasaiian () and Sahar Zare ()
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Daryoush Foroughi: Iran
Ali Saeedi: Iran
Amir Rasaiian: Iran
Sahar Zare: Iran

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2011, vol. 16, issue 2, 57-82

Abstract: Earnings quality is an effective factor in determining the level of cash holdings in corporations. Some researches indicate that increase in accounting information quality leads to decrease cash holdings. Therefore the main goal of this paper is to review the relationship between earnings quality as independent variable and cash holdings as dependent variable in Tehran Stock Exchange. The other control variables in this research are growth opportunities, firm size, the structure of liabilities maturity, relation with financial institutes, opportunity cost of investment in cash assets, firm leverage, other cash assets, the capacity of producing cash flow, percentage of dividend payout, rate of investment in fixed assets on net of fixed assets at the first of the term, age of the firm and business group membership. Therefore 150 firms that their required data for a ten year period (2000-2009) was available were studied. The multivariate pooled regression model is used to examine the hypotheses. The conclusions indicate that there is a negative and significant relationship between earnings quality and cash holdings in Tehran Stock Exchange. The conclusions indicate that about 85 percent of changes in the level of cash holdings explained with changes in variables used in research model

Keywords: Earnings Quality; Cash Holdings; Information Asymmetry; Agency Theory; the Static Tradeoff Theory; Peking Order Theory; Free Cash Flow Theory (search for similar items in EconPapers)
Date: 2011
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