The impact of financial reporting Transparency on value relevance of accounting information: evidence of Tehran Security Exchange

Abstract

The main purpose of the paper is to examine the relation between financial reporting Transparency and value relevance of accounting information. In order to measure financial reporting transparency in this paper, three important qualitative of accounting information, specially earning is used which improve financial reporting Transparency. These proxies are unsmoothing, earning predictability, accrual quality. In order to make assurance of results on each proxy, component index is made. The study used the Ohlson valuation model (1995) to examine value relevance of accounting information. After adjusting for outliers, a sample consists of 78 firms over 2006 to 2013 were studied. The findings indicate that financial accounting transparency has significant and positive effect on value relevance of accounting information. The results could encourage managers, who are interested in attracting more capital at lower costs, to improve the level of financial reporting transparency. This may lead to store investor confidence and increase the number of investors in Tehran Security Exchange and ultimately, bring growth and prosperity for the community.

Keywords

• financial reporting Transparency
• Value relevance of accounting information
• earning predictability
• Accrual quality