Investigating the effect of management behavioral strains on the relationship between financial statements entropy and stock returns

The purpose of this study is Investigating the effect of management behavioral strains on the relationship between entropy of financial statements and stock returns in companies listed on the Tehran Stock Exchange. The present study is applied in terms of purpose and regression correlation analysis in terms of method. To achieve the purpose of the study, 94 companies listed on the Tehran Stock Exchange during the period 1392 to 1399 were surveyed. Combined data analysis and multivariate linear regression were used to test the research hypotheses. the research findings show that the entropy of financial statements has a negative and significant relationship with stock returns. Also, the research findings indicate that the management behavioral strains (narcissism and overconfidence of managers) intensify the negative relationship between the entropy of financial statements with stock returns. The entropy of financial statements increases the risk of information and consequently discourages investors and creditors in their decisions to invest or lend and leads to a decrease in stock returns. On the other hand, the tendency of narcissistic managers and overconfidence in biased financial reporting reduces the quality and credibility of financial statements as one of the most important sources of information for users of financial statements and leads to Intensify the negative relationship between the entropy of financial statements and stock returns.