Investigating the Effect of Information Environment on the Relationship between Management Forecast Error and Idiosyncratic Risk in Companies Accepted in Tehran Stock Exchange

Investors in the stock market decide on the risk factors, returns, and stock liquidity. Considering the impact of the company's disclosure quality on these factors, management's forecast errors can increase the risk of a company. On the other hand, by strengthening the company's information environment, perhaps the weaknesses of the management forecast error can be reduced. So this study investigates the effect of information environment on the relationship between management forecast error and idiosyncratic risk. Study population includes qualified companies in Tehran stock exchange. After using systematic elimination methods, data from 56 companies in 2010 -2017 period is used, but for extracting data the period is 2009 to 2017. To test study hypothesis, multi-variable regression methods using panel data is utilized. Information asymmetry is used to evaluate information environment; Management error in forecasting net income, operating income and sales is used for estimating management forecast errors; and fore measuring Idiosyncratic risk, Asynchronicity and Idiosyncratic Volatility is utilized. Results of this study show a significant direct relationship between management forecast error and idiosyncratic risk. In addition, in companies with stronger information environment, the direct relationship between management forecast error and non-systematic risk is lower.