This study examines the impact of bad and good news on the persistence of the earnings components and consequently misprices these components in Tehran stock exchange market. We use next year returns to measure the good and bad news, and also apply Mishkin test (1983) to measure the market mispricing. The required data is extracted from the financial statements of 216 companies (2117 firm- years) in 18 active industries in Tehran stock exchange between 2002 and 2013 years. The results indicated that in terms of bad news, accrual persistence ratio of earnings reduces significantly, but this reduction in terms of good news is not significant. In addition, Mishkin test results showed that the market is not efficient about the persistence of earnings components at all, and all persistence ratio of earnings components is priced lower than the actual in different conditions, but the market considers the effect of good and bad news as a factor that increases the persistence of earnings components and in its estimation, exaggeration may occur. JEL classification: G12, G14
Nikbakht, N., & Aflatooni, A. (2014). The Effects of Good and Bad News on Investors' Perception of the Persistence of Accruals. Journal of Iranian Accounting Review, 1(3), 79-94.
MLA
Nader Nikbakht; Abbas Aflatooni. "The Effects of Good and Bad News on Investors' Perception of the Persistence of Accruals". Journal of Iranian Accounting Review, 1, 3, 2014, 79-94.
HARVARD
Nikbakht, N., Aflatooni, A. (2014). 'The Effects of Good and Bad News on Investors' Perception of the Persistence of Accruals', Journal of Iranian Accounting Review, 1(3), pp. 79-94.
VANCOUVER
Nikbakht, N., Aflatooni, A. The Effects of Good and Bad News on Investors' Perception of the Persistence of Accruals. Journal of Iranian Accounting Review, 2014; 1(3): 79-94.
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