Study of the Financial Reporting Quality in Reducing Conflict Between Investment Decisions and Dividend Policy

Financial reporting purposes emerge from the informational needs and desires of consumers outside the organization. The main purpose is to express the economic outcomes of events and financial operations on the business and operations of the commercial unit to help third parties and to make financial decisions in connection with its business. High quality financial reporting through presenting more information about the value of investment projects of the company, reduces informational asymmetry, thus financing decisions are made correctly. This study, examines the constraining effect of dividend policy of companies on investment decisions through the quality of financial reporting. The present study is practical with respect to its goal and descriptive-correlation with respect to psychology. To this end, the required data were collected from 82 companies, member of Tehran Stock Exchange during the period of 2004 to 2013. The statistical technique used to test the hypotheses, was multiple regression. The results showed a significant negative relationship between dividend policy and investment decisions, and the quality of financial reporting would significantly reduce this correlation. Other results showed that the quality of financial reporting reduces the relation between dividends and capital expenses in companies with high and low growth.