Search

This study explores the relationship between audit committee characteristics and accounting information quality by justifying the role of the internal information environment and political connections under the theocracy state of Iran with syncretic politics. Using panel data of 558 firms from the Tehran Stock Exchange (TSE) for 2011-2016, we rank firms using Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and entropy method for determination of the weight of evaluating indicators. The firms are positioned into high- to low-level political connections, and two proxies for audit committee characteristics are used: independence of audit committee and financial knowledge. Furthermore, three proxies are used for an internal information environment: earning announcement speed, the accuracy of earning forecasting and lack of financial restatements. Our findings show that there is a significant and positive relationship between the audit committee and financial information quality characteristics in high-level political connections, as well as between financial knowledge and financial information quality. Furthermore, the findings of this study suggest that the application of political economy theories could be appropriate for more inquiry. [ABSTRACT FROM AUTHOR]

This study provides a detailed analysis of the impact of financial sanctions on publicly traded companies. We consider the effect of imposing and lifting sanctions on the target country's traded equities and examine the differences in the reaction of politically connected firms and those without such connections. The paper focuses on Iran due to (1) its sizable financial markets, (2) imposition of sanctions of varying severity and duration on private and state-owned companies, (3) the significant presence of politically connected firms in the stock market, and (4) the unique event of the 2015 nuclear deal, resulting in fairly rapid lifting of a sizable portion of imposed sanctions. We find that sanctions affect politically connected firms more than ordinary firms, have lasting negative effects on profitability ratios, and that politically connected firms stock prices bounce back more slowly after removal of sanctions. Firms targeted by financial sanctions decrease their leverage and increase their cash holding to manage their perceived increase in risk profile. [ABSTRACT FROM AUTHOR]

This study enriches the literature concerning the political economy of corporate governance (CG) and explains the characteristics of CG in Iran based upon the political economy model. Hence, we modify and extend the conceptual framework of the political economy of CG based on new evidence from Iran. In addition, to answer the research questions, this framework highlights the political connections of interest groups and political interventions as the principal issues relating to Iranian CG mechanisms. Moreover, it can be concluded that specific CG characteristics of the political economy in Iran, have a negative impact on the quality of CG, including state ownership, state board, state CEO, concentrated ownership, board and CEO alignment with controlling shareholders. The interpretative and predictive power of the conceptual framework of political economy of CG is promoted in this study at both the firm and macro levels. In addition, the framework can provide a basis to study CG mechanisms in countries with a governmental economy. [ABSTRACT FROM AUTHOR]

We examine the effect of political connections and political cycles on stock returns of listed companies in Iran. Using 1146 firm-year observations derived from firms listed on the Tehran Stock Exchange (TSE) for the period 2005–2017, we find that political connections are positively associated with firms' annual actual returns and annual abnormal returns. Presidential elections strengthen the positive relationship between political connections and cumulative abnormal returns. Transfer of power to the Moderation (Principlist) party in 2013 (2005) strengthened (weakened) the positive relation between political connections and cumulative abnormal returns. Several sensitivity tests show that the results are not materially different from the main findings. Consistent with the political economy perspective, the findings suggest that political connections in a centrally planned economy are valuable for both parties and they become even more valuable in election years. Moreover, consistent with rational partisan theory, results suggest that investors react to political uncertainties stemming from presidential elections and transfer of power, even in emerging market economies like Iran. • Political connections are positively associated with firms' annual actual and abnormal returns. • Presidential elections strengthen the relation between political connection and abnormal returns. • Transfer of power between parties moderates the relation between political connections and firms' abnormal returns. [ABSTRACT FROM AUTHOR]