Factors affecting the earnings response coefficient: An empirical study for Iran

Abstract

The overall goal of this research is to identify the factors that influence earnings response coefficient. The data were gathered using library and corporate documents methods. Thus the dependent variable in this study is the earning response coefficient which was tested based on the market response to the unexpected parts of profit coefficient and the market response to the profit changes coefficient models. Then in order to test the hypotheses, one of the proposed models which had a higher explanatory power was chosen. A total sample of 202 companies listed in Tehran Stock Exchange for the period of 7 years (the years 2006 to 2012) was studied in order to perform the analysis and hypotheses testing. In this research, the combined regression model was used to investigate the research hypotheses. The results of this study suggests that the earning response coefficient has a positive and direct relationship with the quality of earnings, growth opportunities and profitability, a negative and inverse relationship with systematic risk and no relationship with financial leverage.