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The Relationship between Managements’ Forecasted EPS and Risk in the Companies Listed in Tehran Stock Exchange

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  • Jamal Kouhian
  • Abbas Alimoradi Sharifabadi

Abstract

Many of the changes in the value and risk of the companies at the capital market are affected by different and diverse data which are presented to the market by the companies. This paper attempts to examine the risk reaction to the publication of the forecasted profit by the management. The statistics population for this study consists of all companies listed in Tehran Stock Exchange whose related data were available for a period of six years, from 2007 to 2012. This is an implicational and quantitative study intending to test the proposed hypotheses by employing the Multiple Regression method. The research hypotheses have been developed based on the existence of the relationships among three dimensions of the forecasted profit including precision, validity and frequency whit two proxies of risk naming systematic and non-systematic risk. The research results indicated an inverse relationship between validity and frequency of forecasting profits whit non-systematic risk. However no significant relationship could be observed between all dimensions of forecasting profits by the management and the systematic risk.

Suggested Citation

  • Jamal Kouhian & Abbas Alimoradi Sharifabadi, 2015. "The Relationship between Managements’ Forecasted EPS and Risk in the Companies Listed in Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(2), pages 116-126, April.
    • Handle: RePEc:hur:ijaraf:v:5:y:2015:i:2:p:116-126
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    References listed on IDEAS

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    2. J. G. Cragg & Burton G. Malkiel, 1968. "The Consensus And Accuracy Of Some Predictions Of The Growth Of Corporate Earnings," Journal of Finance, American Finance Association, vol. 23(1), pages 67-84, March.
    3. Neil Hartnett & Jennifer Romcke, 2000. "The Predictability of Management Forecast Error: A Study of Australian IPO Disclosures," Multinational Finance Journal, Multinational Finance Journal, vol. 4(1-2), pages 101-132, March-Jun.
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