The Evaluation of the Relationship Between the Informational Content of Accruals and Selected Financial Ratios with Stock Price of Listed Companies in Tehran Stock Exchange

Managers and investors have always been interested in the ability of financial statements to summarize value relevant information that affects stock returns and also the relation of this information to the value of the company. Given the financial reports aims’, it is supposed that much of the information in financial statements can be used in investors decision-making model. The aim of this research is to assess the relation of accrual components and selected financial ratios with the stock prices of listed companies in Tehran Stock Exchange. For this purpose, nine hypotheses and three models were set. In addition to earning per share (EPS), each model includes the variables that may have informational content about manipulation of financial statements and evaluation of earning-price relation. To estimate these models and analysis of data, the panel data method were applied to a sample of 137 the companies during 2001 to 2008. The results show that EPS and the ratios of working capital to assets, net profit to assets, net profit to sales and sales to assets in 95% confidence interval are all related to stock prices of sampled companies. The results also indicate that accrual components are not statistically significant in this case. This indicates that consideration of quality of earning by the accruals is not so important in earning-price relation and the variability of earning is less influenced by the business position and manager decisions about accruals. In general we can claim that the earning per share is the most related accounting variable to the value of company in the level of the sampled companies and there is an inverse relationship between current assets and stock prices.