The Mediating Effect of Earnings Acceleration on the Relationship between Stock Fragility and the Speed of Stock Price Convergence

Document Type : Research Paper

Authors

1 Instructor, Department of Accounting, Faculty of Management, Economics and Accounting, Payame Noor University, Tehran, Iran.

2 Assistant Prof., Department of Accounting, Faculty of Literature and Humanities, Kerman Branch, Islamic Azad University, Kerman, Iran.

3 Instructor, Department of Accounting, Faculty of Literature and Humanities, Kerman Branch, Islamic Azad University, Kerman, Iran.

Abstract

Objective: In addition to being aware of stock fragility, Investors are considering an Earnings acceleration strategy to understand how companies' financial practices change to achieve the expected returns and the speed of stock price convergence. Therefore, the purpose of this study is to investigate the mediating effect of earnings acceleration on the relationship between stock fragility and the speed of stock price convergence.
Methods: The statistical population of this research is the companies listed on the Tehran Stock Exchange, among which data are available for 87 companies and the time horizon from 2009 to 2019. Therefore, 870 years -participation in this study have been examined. Barapratab et al (2015) model has been used to measure the variable of the speed of stock price convergence. Quantum financial theory has been used to measure stock fragility. To test the research hypotheses, the generalized least squares regression model has been used.
Results: The results of the study indicate that there is a positive and significant relationship between stock fragility and the speed of stock price convergence. Expression of earnings also explains the relationship between stock fragility and the speed of stock price convergence.
Conclusion: The convergence of Iranian stock prices has important implications in terms of economy and policy. During periods of stock fragility, stock price convergence generated by one firm rapidly spreads to other subsidiaries in an industry Therefore, it is of special importance to attract investments and reduce the range of risks. Also in emerging markets such as the stock market and the level of investment attitudes in developing societies, as the acceleration in factors such as profits increases, optimistic thinking increases the level of risk-taking and thus generalizes more strongly in the industry or other stocks.

Keywords

References

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Financial Research Journal
Volume 23, Issue 3
2021
Pages 377-403

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