University of Isfahan Journal of Asset Management and Financing 2383-1189 9 3 2021 09 23 The Effect of Financial Statement Comparability on Idiosyncratic Return Volatility by Emphasis on the Financial Reporting Quality The Effect of Financial Statement Comparability on Idiosyncratic Return Volatility by Emphasis on the Financial Reporting Quality 1 18 25243 10.22108/amf.2020.123782.1554 FA Majid Hashemi Dehchi Ph.D. Candidate. Department of accounting, adminstrative scienes and economics, university of isfahan, iran 0000-0009-0009-0009 Naser Izadinia Associate Professor in Accounting, Administrative Sciences and Economics Faculty, University of Isfahan, Isfahan, Iran Hadi Amiri Assistant Professor. Department of Economics, adminstrative sciences and economics, university of isfahan, iran. Journal Article 2020 07 18 Abstract The present study aims to determine the effect of financial statement comparability on the idiosyncratic return volatility with emphasis on the quality of financial reporting. To test the research hypotheses, 80 companies were examined among the companies listed on the Tehran Stock Exchange during the years 1389 to 1397. In order to test the research hypotheses, a multivariate regression model and combined data have been used. The results of the research indicate that financial statement comparability has a significant and negative effect on idiosyncratic return volatility. The research findings also showed that when the quality of financial reporting is poor, the effect of financial statement comparability on idiosyncratic return volatility is stronger. This study emphasizes the benefits of financial statement comparability. The financial statement comparability reduces the risk of uncertainty about the cash flows and firm future performance and causes idiosyncratic return volatility to reduce. Keywords: Financial statement comparability, Financial reporting quality, Idiosyncratic return volatility Introduction One of the main topics of the financial markets that has attracted the attention of capital market researchers is the discussion of stock return volatility. The stock returns volatility into two components: systematic and idiosyncratic. The part of the volatility that is uncontrollable and is caused by external factors is called systematic volatility. Moreover, idiosyncratic return volatility reflects the company's idiosyncratic return volatility, which is mainly derived from the company's activities and is independent of capital market volatility. The idiosyncratic return volatility has important applications such as portfolio diversification, active portfolio management, the relationship between risk and reward of managers, managers 'reward policies, and valuation of employees' stock authority. Hence, it is crucial to examine the factors affecting it. Uncertainty or lack of accurate and correct forecasting of future cash flows and firm performance causes idiosyncratic return volatility. On the other hand, the ability to compare financial statements by assisting users of financial statements in predicting and accurately forecasting the future cash flow and performance of the company affects the idiosyncratic return volatility. The ability to compare financial statements improves the information environment, increases the quality of financial reporting, and reduces information asymmetry. These capabilities help investors to better understand and evaluate the company's cash flows and performance, which reduces idiosyncratic return volatility. However, poor financial reporting quality prevents investors from properly evaluating the company's performance. This increases uncertainty about the company's performance and the consequent idiosyncratic return volatility. In the presence of poor financial reporting quality, the role of comparability of financial statements in the decision-making process becomes more important. The comparability of financial statements allows investors to compare the quality and performance of companies through better comparisons with similar companies furthermore, it is expected that when the quality of financial reporting is poor, the negative relationship between comparability of financial statements and idiosyncratic return volatility is stronger. Previous studies in Iran have examined the factors affecting idiosyncratic return volatility. Moreover, these studies have examined various factors such as financial reporting quality, firm life cycle, audit quality), etc., on the other hand, none of the effects of comparability of financial statements on idiosyncratic return volatility and in terms of According to the emphasis of the International Accounting Standards Transition Institutions and the Auditing Organization as the custodian of accounting standardization in Iran, on the great importance of comparability and the important role of comparability in empowering investors, creditors and other creditors in informed decision-making in this study. The relationship between comparability and idiosyncratic return volatility with respect to the effect of financial reporting quality on this relationship was investigated and this issue is one of the leading research innovations. Another theory of this research is that in this research, Rowling regression has been used to measure the idiosyncratic return volatility, which has not been used in other studies. The goal of the present study is to determine the effect of the financial statement comparability on the idiosyncratic return volatility with emphasis on the quality of financial reporting. Method and Data: In order to test the research hypotheses, 80 companies were examined among the companies listed on the Tehran Stock Exchange during the years 2010 to 2018. To test the research hypotheses, a multivariate regression model and combined data have been used. Findings: The results of the research indicate that financial statement comparability has a significant and negative effect on idiosyncratic return volatility. The research findings also showed that when the quality of financial reporting is poor, the effect of financial statement comparability on idiosyncratic return volatility is stronger. This study emphasizes the benefits of financial statement comparability. The financial statement comparability reduces the risk of uncertainty about the cash flows and firm future performance and causes idiosyncratic return volatility to reduce. Conclusion and discussion: Idiosyncratic return volatility has increased over time, volatility in stock market returns has remained unchanged. As a result, the study of idiosyncratic return volatility is motivating since the upward trend in idiosyncratic return volatility has important implications for portfolio diversification, event studies, pricing options, and macroeconomics. Many investors may fail to diversify their portfolios in the way that financial theory recommends, and as a result, are affected by changes in idiosyncratic return volatility, so it is important to identify the factors that affect idiosyncratic return volatility. The result of testing the first hypothesis showed that the ability to compare financial statements hurts idiosyncratic return volatility. This means that the comparability of financial statements allows investors to more accurately assess and understand the firm's performance and cash flow by comparing similar companies and increases the quantity and quality of information needed by investors, it causes risk. Related to information and valuation is reduced and as a result, idiosyncratic return volatility is reduced. The results of testing the second hypothesis showed that when the quality of financial reporting is poor, the role of comparability of financial statements on reducing idiosyncratic return volatility becomes stronger. In the sense that when the quality of financial reporting is poor, it improves the comparability of the information environment and transparency about the firm and reduces investors' uncertainty about cash flow and stock returns, thus reducing idiosyncratic return volatility. Abstract The present study aims to determine the effect of financial statement comparability on the idiosyncratic return volatility with emphasis on the quality of financial reporting. To test the research hypotheses, 80 companies were examined among the companies listed on the Tehran Stock Exchange during the years 1389 to 1397. In order to test the research hypotheses, a multivariate regression model and combined data have been used. The results of the research indicate that financial statement comparability has a significant and negative effect on idiosyncratic return volatility. The research findings also showed that when the quality of financial reporting is poor, the effect of financial statement comparability on idiosyncratic return volatility is stronger. This study emphasizes the benefits of financial statement comparability. The financial statement comparability reduces the risk of uncertainty about the cash flows and firm future performance and causes idiosyncratic return volatility to reduce. Keywords: Financial statement comparability, Financial reporting quality, Idiosyncratic return volatility Introduction One of the main topics of the financial markets that has attracted the attention of capital market researchers is the discussion of stock return volatility. The stock returns volatility into two components: systematic and idiosyncratic. The part of the volatility that is uncontrollable and is caused by external factors is called systematic volatility. Moreover, idiosyncratic return volatility reflects the company's idiosyncratic return volatility, which is mainly derived from the company's activities and is independent of capital market volatility. The idiosyncratic return volatility has important applications such as portfolio diversification, active portfolio management, the relationship between risk and reward of managers, managers 'reward policies, and valuation of employees' stock authority. Hence, it is crucial to examine the factors affecting it. Uncertainty or lack of accurate and correct forecasting of future cash flows and firm performance causes idiosyncratic return volatility. On the other hand, the ability to compare financial statements by assisting users of financial statements in predicting and accurately forecasting the future cash flow and performance of the company affects the idiosyncratic return volatility. The ability to compare financial statements improves the information environment, increases the quality of financial reporting, and reduces information asymmetry. These capabilities help investors to better understand and evaluate the company's cash flows and performance, which reduces idiosyncratic return volatility. However, poor financial reporting quality prevents investors from properly evaluating the company's performance. This increases uncertainty about the company's performance and the consequent idiosyncratic return volatility. In the presence of poor financial reporting quality, the role of comparability of financial statements in the decision-making process becomes more important. The comparability of financial statements allows investors to compare the quality and performance of companies through better comparisons with similar companies furthermore, it is expected that when the quality of financial reporting is poor, the negative relationship between comparability of financial statements and idiosyncratic return volatility is stronger. Previous studies in Iran have examined the factors affecting idiosyncratic return volatility. Moreover, these studies have examined various factors such as financial reporting quality, firm life cycle, audit quality), etc., on the other hand, none of the effects of comparability of financial statements on idiosyncratic return volatility and in terms of According to the emphasis of the International Accounting Standards Transition Institutions and the Auditing Organization as the custodian of accounting standardization in Iran, on the great importance of comparability and the important role of comparability in empowering investors, creditors and other creditors in informed decision-making in this study. The relationship between comparability and idiosyncratic return volatility with respect to the effect of financial reporting quality on this relationship was investigated and this issue is one of the leading research innovations. Another theory of this research is that in this research, Rowling regression has been used to measure the idiosyncratic return volatility, which has not been used in other studies. The goal of the present study is to determine the effect of the financial statement comparability on the idiosyncratic return volatility with emphasis on the quality of financial reporting. Method and Data: In order to test the research hypotheses, 80 companies were examined among the companies listed on the Tehran Stock Exchange during the years 2010 to 2018. To test the research hypotheses, a multivariate regression model and combined data have been used. Findings: The results of the research indicate that financial statement comparability has a significant and negative effect on idiosyncratic return volatility. The research findings also showed that when the quality of financial reporting is poor, the effect of financial statement comparability on idiosyncratic return volatility is stronger. This study emphasizes the benefits of financial statement comparability. The financial statement comparability reduces the risk of uncertainty about the cash flows and firm future performance and causes idiosyncratic return volatility to reduce. Conclusion and discussion: Idiosyncratic return volatility has increased over time, volatility in stock market returns has remained unchanged. As a result, the study of idiosyncratic return volatility is motivating since the upward trend in idiosyncratic return volatility has important implications for portfolio diversification, event studies, pricing options, and macroeconomics. Many investors may fail to diversify their portfolios in the way that financial theory recommends, and as a result, are affected by changes in idiosyncratic return volatility, so it is important to identify the factors that affect idiosyncratic return volatility. The result of testing the first hypothesis showed that the ability to compare financial statements hurts idiosyncratic return volatility. This means that the comparability of financial statements allows investors to more accurately assess and understand the firm's performance and cash flow by comparing similar companies and increases the quantity and quality of information needed by investors, it causes risk. Related to information and valuation is reduced and as a result, idiosyncratic return volatility is reduced. The results of testing the second hypothesis showed that when the quality of financial reporting is poor, the role of comparability of financial statements on reducing idiosyncratic return volatility becomes stronger. In the sense that when the quality of financial reporting is poor, it improves the comparability of the information environment and transparency about the firm and reduces investors' uncertainty about cash flow and stock returns, thus reducing idiosyncratic return volatility.

https://amf.ui.ac.ir/article_25243_19f4bbcf652b9f12e45834debb891a94.pdf

University of Isfahan Journal of Asset Management and Financing 2383-1189 9 3 2021 09 23 Investigating the impact of macroeconomic variables on Risk-Adjusted Return on Capital (RAROC) of Registered Banks on Tehran Stock Exchange and Iran Fara Bourse Investigating the impact of macroeconomic variables on Risk-Adjusted Return on Capital (RAROC) of Registered Banks on Tehran Stock Exchange and Iran Fara Bourse 19 36 25635 10.22108/amf.2021.125242.1594 FA Mohammad Sadegh Abdollahi Poor M.A Student, Financial and Banking Department, Management and Accounting Faculty, Allameh Tabataba'i University, Tehran, Iran Mohammad Hashem Botshekan Associate professor, Department of finance and banking, faculty of Accounting and Management, University of Allameh tabataba'i, Tehran, Iran Mostafa Sargolzaei Assistant Professor, Financial and Banking Department, Banking and Accounting Faculty. Allameh Tabataba'i University, Tehran, Iran Journal Article 2020 10 18 Abstract The Risk-Adjusted Return on Capital (RAROC), as a modern performance measure, is introduced in comparison to traditional performance measures and has been calculated for all the banks listed on the Tehran Stock Exchange and Iran Fara Bourse, based on a new method extracted from earlier studies. The research period is 8 years, from 2012 to 2019. Assessing the effect of macroeconomic variables on this performance measure is another aim of this research. In doing so, RAROC has been estimated by using the Net Income, Expected Loss, and Supervisory Equity of banks. At the next stage, some macroeconomic variables have been selected to run the model. The impact of these variables on RAROC is investigated by a Multiple Linear Regression Model and Panel data analysis. Based on the results, the Inflation rate, the growth of currency exchange rate to Consumer Price Index (CPI) ratio and Liquidity Growth affect RAROC. Except for the inflation rate which has a reversed effect on the dependent variable, others have a straight impact on RAROC. Keywords: Risk-Adjusted Return on Capital (RAROC), Loss Given Default (LGD), Recovery Rate, Macroeconomic Variables, Banks. Introduction There are different kinds of common performance measures in banks. However, the impact of different types of risks is not considered in most of them, such as return on asset (ROA), return on capital (ROC), and return on equity (ROE). Consequently, these measures are not proper for performance evaluation in banks regarding the complex structure of banks and their huge impact on the whole economy. In this research, the Risk-Adjusted Return on Capital (RAROC) which is known as a contemporary performance measure, especially in banks, is compared to other performance measures, like return on assets (ROA), return on capital (ROC), return on equity (ROE), Return on Risk-Adjusted Capital (RORAC) and Risk-Adjusted Return on Risk-Adjusted Capital (RARORAC). Method and Data The Risk-Adjusted Return on Capital (RAROC) is calculated for all the banks listed on Tehran Stock Exchange and Iran Fara Bourse, using different methods based on which have been extracted from earlier studies. Therefore, the appropriate model is chosen among them regarding the information restriction. In doing so, the net income of these banks is extracted from their Income Statement by subtracting the whole expenses from the whole revenues of banks. The expected loss is estimated by the probability of default, loss given default, and exposure at default based on the model of research. For probability of default, the ratio of non-performing loans (NPL) is used. For calculating the exposure at default, the amount of net loans is used, and finally, for calculating loss given default, the recovery rate is utilized based on new studies in this area. After that, although there are two different ways of calculating the capital (economical capital and supervisory capital), the Supervisory Capital of banks is chosen, based on preceding studies, and that is extracted from banks’ financial statements based on the instruction issued by Central Bank of Iran. Considering this information together, the RAROC is calculated for all the banks listed on Tehran Stock Exchange and Iran Fara Bourse. Although the researchers had planned to run the model for a longer period, the research period has been limited to 8 years, from 2012 to 2019 because of a lack of data in calculating some important indicators. At the next stage, some macroeconomic variables are selected to run the model which are inflation rate, the ratio of the currency exchange rate to consumer price index (CPI), and liquidity growth. The impact of these variables on Risk-Adjusted Return on Capital (RAROC) is investigated by a multiple linear regression model. Findings Based on the findings, among macroeconomic variables, inflation rate, the ratio of the currency exchange rate to consumer price index (CPI), and liquidity growth affect RAROC. Except for the inflation rate which has a reversed effect on the dependent variable, others have straight impacts on Risk-Adjusted Return on Capital (RAROC). Conclusion and discussion In conclusion, the more the inflation rate will be, the less Risk-Adjusted Return on Capital (RAROC) listed banks on Tehran Stock Exchange will possess. On the other hand, the higher ratio of the currency exchange rate to consumer price index (CPI) and liquidity growth is, the higher the Risk-Adjusted Return on Capital (RAROC) is. To sum up, it could be recognized that some macroeconomic variables could have an impact on this new performance measure in banks. It means that, although Risk-Adjusted Return on Capital (RAROC) includes internal indicators in banks’ financial statements, it could be affected by external macroeconomic variables as well. Abstract The Risk-Adjusted Return on Capital (RAROC), as a modern performance measure, is introduced in comparison to traditional performance measures and has been calculated for all the banks listed on the Tehran Stock Exchange and Iran Fara Bourse, based on a new method extracted from earlier studies. The research period is 8 years, from 2012 to 2019. Assessing the effect of macroeconomic variables on this performance measure is another aim of this research. In doing so, RAROC has been estimated by using the Net Income, Expected Loss, and Supervisory Equity of banks. At the next stage, some macroeconomic variables have been selected to run the model. The impact of these variables on RAROC is investigated by a Multiple Linear Regression Model and Panel data analysis. Based on the results, the Inflation rate, the growth of currency exchange rate to Consumer Price Index (CPI) ratio and Liquidity Growth affect RAROC. Except for the inflation rate which has a reversed effect on the dependent variable, others have a straight impact on RAROC. Keywords: Risk-Adjusted Return on Capital (RAROC), Loss Given Default (LGD), Recovery Rate, Macroeconomic Variables, Banks. Introduction There are different kinds of common performance measures in banks. However, the impact of different types of risks is not considered in most of them, such as return on asset (ROA), return on capital (ROC), and return on equity (ROE). Consequently, these measures are not proper for performance evaluation in banks regarding the complex structure of banks and their huge impact on the whole economy. In this research, the Risk-Adjusted Return on Capital (RAROC) which is known as a contemporary performance measure, especially in banks, is compared to other performance measures, like return on assets (ROA), return on capital (ROC), return on equity (ROE), Return on Risk-Adjusted Capital (RORAC) and Risk-Adjusted Return on Risk-Adjusted Capital (RARORAC). Method and Data The Risk-Adjusted Return on Capital (RAROC) is calculated for all the banks listed on Tehran Stock Exchange and Iran Fara Bourse, using different methods based on which have been extracted from earlier studies. Therefore, the appropriate model is chosen among them regarding the information restriction. In doing so, the net income of these banks is extracted from their Income Statement by subtracting the whole expenses from the whole revenues of banks. The expected loss is estimated by the probability of default, loss given default, and exposure at default based on the model of research. For probability of default, the ratio of non-performing loans (NPL) is used. For calculating the exposure at default, the amount of net loans is used, and finally, for calculating loss given default, the recovery rate is utilized based on new studies in this area. After that, although there are two different ways of calculating the capital (economical capital and supervisory capital), the Supervisory Capital of banks is chosen, based on preceding studies, and that is extracted from banks’ financial statements based on the instruction issued by Central Bank of Iran. Considering this information together, the RAROC is calculated for all the banks listed on Tehran Stock Exchange and Iran Fara Bourse. Although the researchers had planned to run the model for a longer period, the research period has been limited to 8 years, from 2012 to 2019 because of a lack of data in calculating some important indicators. At the next stage, some macroeconomic variables are selected to run the model which are inflation rate, the ratio of the currency exchange rate to consumer price index (CPI), and liquidity growth. The impact of these variables on Risk-Adjusted Return on Capital (RAROC) is investigated by a multiple linear regression model. Findings Based on the findings, among macroeconomic variables, inflation rate, the ratio of the currency exchange rate to consumer price index (CPI), and liquidity growth affect RAROC. Except for the inflation rate which has a reversed effect on the dependent variable, others have straight impacts on Risk-Adjusted Return on Capital (RAROC). Conclusion and discussion In conclusion, the more the inflation rate will be, the less Risk-Adjusted Return on Capital (RAROC) listed banks on Tehran Stock Exchange will possess. On the other hand, the higher ratio of the currency exchange rate to consumer price index (CPI) and liquidity growth is, the higher the Risk-Adjusted Return on Capital (RAROC) is. To sum up, it could be recognized that some macroeconomic variables could have an impact on this new performance measure in banks. It means that, although Risk-Adjusted Return on Capital (RAROC) includes internal indicators in banks’ financial statements, it could be affected by external macroeconomic variables as well.

https://amf.ui.ac.ir/article_25635_365dcc89fc015afff0c7b2dc28a851b8.pdf

University of Isfahan Journal of Asset Management and Financing 2383-1189 9 3 2021 09 23 The Role of Financial Market Stability on Monetary Policy Transmission Mechanism in Iran: A Multivariate GARCH Approach The Role of Financial Market Stability on Monetary Policy Transmission Mechanism in Iran: A Multivariate GARCH Approach 37 64 25660 10.22108/amf.2021.126331.1618 FA Farinaz Rahimian Ph. D. Candidate, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran Hossain Sharifi Renani Associate Professor, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran Sara Ghobadi Assistant Professor, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran Journal Article 2021 02 12 The effect of uncertainty on monetary growth in recent years has attracted much attention. The mechanism of monetary transmission through the financial market affects consumption expenditures, investment, and the real sector of the economy. The stock market is an important component of financial markets affected by variables such as investor’s confidence, exchange rate, and money. Uncertainty relationships between variables are investigated by using quarterly data of the Iranian economy during 2001-2018 and the MGARCH-VECH-VAR approach. Increasing real exchange rate fluctuations will lead to increasing investor’s confidence uncertainty and financial market instability, followed by increased monetary growth uncertainty and the real sector of the economy. By increasing the confidence of investors, it is possible to reduce the monetary growth rate, as well as increase consumption through the wealth effect and increase the growth rate of production. The effect of uncertainty on monetary growth in recent years has attracted much attention. The mechanism of monetary transmission through the financial market affects consumption expenditures, investment, and the real sector of the economy. The stock market is an important component of financial markets affected by variables such as investor’s confidence, exchange rate, and money. Uncertainty relationships between variables are investigated by using quarterly data of the Iranian economy during 2001-2018 and the MGARCH-VECH-VAR approach. Increasing real exchange rate fluctuations will lead to increasing investor’s confidence uncertainty and financial market instability, followed by increased monetary growth uncertainty and the real sector of the economy. By increasing the confidence of investors, it is possible to reduce the monetary growth rate, as well as increase consumption through the wealth effect and increase the growth rate of production.

https://amf.ui.ac.ir/article_25660_a318344da6e0afbcb2113e6497a9cb62.pdf

University of Isfahan Journal of Asset Management and Financing 2383-1189 9 3 2021 09 23 Adjusted Capital Asset Pricing Models (CAPMs) with Respect to the Magnet Effect Factor (MEF) Caused by the Range of Stock Price Fluctuations Adjusted Capital Asset Pricing Models (CAPMs) with Respect to the Magnet Effect Factor (MEF) Caused by the Range of Stock Price Fluctuations 65 88 26561 10.22108/amf.2022.130725.1699 FA Meisam Jafaripour Ph.D. Student of Accounting, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran Mohammad Ramezan Ahmadi Assistant Professor of Accounting, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran Esmaeel Mazaheri Assistant Professor of Accounting, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran Seyed Aziz Arman Professor of Economic, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran Journal Article 2021 09 28 Abstract The aim of this study was to introduce the Magnet Effect Factor (MEF) caused by the range of stock price fluctuations as a risk premium factor in the Capital Asset Pricing Model (CAPM) and the multi-factor models of Fama and French. To answer the research questions, the information of 120 firms listed on Tehran Stock Exchange (TSE) during the period of 2010-2019 was used. According to Fama and French research, monthly returns of the portfolios were utilized for analysis. Then, using the panel data regression approach and GRS test, performances of the adjusted models with MEF were compared with those of the conventional models for explaining the stock returns. The results showed that MEF was effective in pricing capital assets and the developments of the research models with this factor and formation of the corresponding adjusted models improved performances of those models in explaining the difference in stock returns. The results also revealed that the adjusted 5-factor model with the MEF had better performance compared to the adjusted 3 and 6-factor models and the adjusted CAPM with the MEF. Abstract The aim of this study was to introduce the Magnet Effect Factor (MEF) caused by the range of stock price fluctuations as a risk premium factor in the Capital Asset Pricing Model (CAPM) and the multi-factor models of Fama and French. To answer the research questions, the information of 120 firms listed on Tehran Stock Exchange (TSE) during the period of 2010-2019 was used. According to Fama and French research, monthly returns of the portfolios were utilized for analysis. Then, using the panel data regression approach and GRS test, performances of the adjusted models with MEF were compared with those of the conventional models for explaining the stock returns. The results showed that MEF was effective in pricing capital assets and the developments of the research models with this factor and formation of the corresponding adjusted models improved performances of those models in explaining the difference in stock returns. The results also revealed that the adjusted 5-factor model with the MEF had better performance compared to the adjusted 3 and 6-factor models and the adjusted CAPM with the MEF.

https://amf.ui.ac.ir/article_26561_ea49fa0fd92adda167a0ccda9ea4a857.pdf

University of Isfahan Journal of Asset Management and Financing 2383-1189 9 3 2021 09 23 The Effects of Income Diversification on Market Power in the Iranian Banking System The Effects of Income Diversification on Market Power in the Iranian Banking System 89 104 26721 10.22108/amf.2022.129626.1679 FA Mohammad Hassan Gholizadeh Associate Professor, Department of Management, Faculty of Humanities and Literature, University of Guilan, Rasht, Iran Mohsen Akbari Associate Professor, Department of Management, Faculty of Humanities and Literature, University of Guilan, Rasht, Iran ‎ Mahsa Farkhondeh Ph. D. Student, Department of Management, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran Mohammad Habibi M.A Student, Department of Management, Faculty of Humanities and Literature, University of Guilan, Rasht, Iran ‎ Journal Article 2021 09 13 The purpose of this research was to investigate the effects of income diversification strategies on market power in Iranian banking system during the period of 2015-2020. The fitting method of the present study was the Generalized Method of Moments (GMM) model. Market power in banking system is measured by the Lerner index using the Translog stochastic frontier cost function. Two adjusted Herfindahl-Hirschman indices are used to measure income diversification strategies, including interest and non-interest income diversifications. The results showed that the non-interest income diversification strategy had a significant positive effect on market power in the banking system; however, the effect of the interest income diversification strategy on the market power was not confirmed. Introduction In recent years, one of the most important issues considered by researchers in industrial economics in the field of banking is analysis of the interbank market structure, market power of banking system and impacts of internal and external factors that have been widely used by policy makers and managers. It helps the banking industry to become more competitive. On the other hand, it can be seen that the banking industry has faced fundamental, rapid, and complex changes, including mergers, acquisitions, structural reforms, deregulation, and increasing competition. Many commercial banks have been pursuing income diversification strategies for maintaining their positions in the market in response to increasing competition. In fact, the competition between financial markets for optimal allocation of financial resources has attracted more depositors towards banks. It has made banks increase their banking facilities for applicants by increasing creativity via various tools. One of the most widely used diversification strategies is income diversification. The income structure includes the two types of interest and non-interest incomes. The structure of interest income includes the lending and traditional activities of banks, while that of non-interest income consists of fee income, commission, foreign exchange income, etc. There are few and contradictory studies on the relationship between the market power of banking system and diversification strategies. Given the contradictory points of view, this question will be raised: What effects do the income diversification strategies have on the market power of banking system in the Iranian banking industry? Method and Data The sample of this study included all the banks in the Iranian banking network operating in Iran during the period of 2015-2020. For this purpose, the required information of 20 banks was collected from their financial statements shown in Codal.ir website. The economic data were also extracted from the Central Bank website. The method used in this research was the Generalized Method of Moments (GMM). In this model, the dependent variable is added with an interval on the right side of the model, which leads to explaining the dynamic effects in the model. The estimated compatibility of the GMM is measured by Sargan test. Findings First, to determine the choice of method between the Pool and Panel or the Fixed and Random Effects method, the Chow test was performed. The results showed that the value of F-Limer statistic was 2.38 and its significance level was 0.0050. Therefore, the panel data were accepted. The Hausman test was then used to distinguish the fixed effects versus random effects. The result of this test was 32.31 ƛ2 and its significance level was 0.0001, which indicated that the model had to be estimated by using the fixed effects. In the next step, the GMM was fitted. The results showed that the variable of market power or competition with one lag had a significance level of less than 0.05. Hence, it had a positive and significant effect on the dependent variable (0.055(. The results also revealed that the non-interest income diversification with a coefficient of 0.21 and significance level of less than 0.05 had a positive and significant impact on the market power of the banking system (0.0094). The findings showed that all the control variables, except for the firm size, had a positive and significant effect on the market power of the banking system. Conclusion and discussion In this study, the effects of income diversification strategies on the market power of banking system were investigated in the Iranian banking industry during the period 1393-2014. The results demonstrated that non-interest income diversification had a positive and significant effect on the competition and market power of the banking system. However, the effect of interest income diversification on the market power of the banking system was not confirmed. It could be argued that commercial banks could create values for themselves based on non-interest income diversification by providing extensive financial services to customers and motivating them to use them so as to create the favorable market power and gain a competitive advantage. To strengthen this strategy, it is suggested that policymakers and legislators provide a better environment for foreign exchange by formulating and approving facilitative policies and creating the necessary infrastructure to cooperate with other banks in the neighboring countries. Banks can earn non-interest income by updating their services and coming up with new and innovative ideas to provide new services and strengthen their competitive positions in banking system. In the future research, the effects of various diversification strategies on market power in the developing and developed countries can be assessed and compared. The purpose of this research was to investigate the effects of income diversification strategies on market power in Iranian banking system during the period of 2015-2020. The fitting method of the present study was the Generalized Method of Moments (GMM) model. Market power in banking system is measured by the Lerner index using the Translog stochastic frontier cost function. Two adjusted Herfindahl-Hirschman indices are used to measure income diversification strategies, including interest and non-interest income diversifications. The results showed that the non-interest income diversification strategy had a significant positive effect on market power in the banking system; however, the effect of the interest income diversification strategy on the market power was not confirmed. Introduction In recent years, one of the most important issues considered by researchers in industrial economics in the field of banking is analysis of the interbank market structure, market power of banking system and impacts of internal and external factors that have been widely used by policy makers and managers. It helps the banking industry to become more competitive. On the other hand, it can be seen that the banking industry has faced fundamental, rapid, and complex changes, including mergers, acquisitions, structural reforms, deregulation, and increasing competition. Many commercial banks have been pursuing income diversification strategies for maintaining their positions in the market in response to increasing competition. In fact, the competition between financial markets for optimal allocation of financial resources has attracted more depositors towards banks. It has made banks increase their banking facilities for applicants by increasing creativity via various tools. One of the most widely used diversification strategies is income diversification. The income structure includes the two types of interest and non-interest incomes. The structure of interest income includes the lending and traditional activities of banks, while that of non-interest income consists of fee income, commission, foreign exchange income, etc. There are few and contradictory studies on the relationship between the market power of banking system and diversification strategies. Given the contradictory points of view, this question will be raised: What effects do the income diversification strategies have on the market power of banking system in the Iranian banking industry? Method and Data The sample of this study included all the banks in the Iranian banking network operating in Iran during the period of 2015-2020. For this purpose, the required information of 20 banks was collected from their financial statements shown in Codal.ir website. The economic data were also extracted from the Central Bank website. The method used in this research was the Generalized Method of Moments (GMM). In this model, the dependent variable is added with an interval on the right side of the model, which leads to explaining the dynamic effects in the model. The estimated compatibility of the GMM is measured by Sargan test. Findings First, to determine the choice of method between the Pool and Panel or the Fixed and Random Effects method, the Chow test was performed. The results showed that the value of F-Limer statistic was 2.38 and its significance level was 0.0050. Therefore, the panel data were accepted. The Hausman test was then used to distinguish the fixed effects versus random effects. The result of this test was 32.31 ƛ2 and its significance level was 0.0001, which indicated that the model had to be estimated by using the fixed effects. In the next step, the GMM was fitted. The results showed that the variable of market power or competition with one lag had a significance level of less than 0.05. Hence, it had a positive and significant effect on the dependent variable (0.055(. The results also revealed that the non-interest income diversification with a coefficient of 0.21 and significance level of less than 0.05 had a positive and significant impact on the market power of the banking system (0.0094). The findings showed that all the control variables, except for the firm size, had a positive and significant effect on the market power of the banking system. Conclusion and discussion In this study, the effects of income diversification strategies on the market power of banking system were investigated in the Iranian banking industry during the period 1393-2014. The results demonstrated that non-interest income diversification had a positive and significant effect on the competition and market power of the banking system. However, the effect of interest income diversification on the market power of the banking system was not confirmed. It could be argued that commercial banks could create values for themselves based on non-interest income diversification by providing extensive financial services to customers and motivating them to use them so as to create the favorable market power and gain a competitive advantage. To strengthen this strategy, it is suggested that policymakers and legislators provide a better environment for foreign exchange by formulating and approving facilitative policies and creating the necessary infrastructure to cooperate with other banks in the neighboring countries. Banks can earn non-interest income by updating their services and coming up with new and innovative ideas to provide new services and strengthen their competitive positions in banking system. In the future research, the effects of various diversification strategies on market power in the developing and developed countries can be assessed and compared.

https://amf.ui.ac.ir/article_26721_685c4ef942bff27faf2039740232d381.pdf

University of Isfahan Journal of Asset Management and Financing 2383-1189 9 3 2021 09 23 Investigating the Mediating Roles of Information Asymmetry and Illiquidity Related to Cluster Trading in the ‎Relationship between Noise Trading and Market Efficiency in Tehran Stock Exchange (TSE)‎ Investigating the Mediating Roles of Information Asymmetry and Illiquidity Related to Cluster Trading in the ‎Relationship between Noise Trading and Market Efficiency in Tehran Stock Exchange (TSE)‎ 105 126 26753 10.22108/amf.2021.129072.1670 FA Mahmood Ramshini Assistant professor, Department of Business Management, Faculty of Humanities, Universityof Bojnord, Bojnord, Iran‎ Fatemeh Zarei Assistant Professor, Department of Management, Faculty of Humanities, Meybod University, Meybod, Iran ‎ Abdolhosein Talebi Najaf Abadi Assistant professor, Department of Accounting, Faculty of Humanities, University of Bojnord, Bojnord, Iran‎ Fatemeh Asadi M.A., Student, Department of Business Management, Faculty of Humanities, Eshragh Ins Higher Education, Bojnourd, Iran ‎ Journal Article 2021 08 29 This study aimed to investigate the effects of information asymmetry and illiquidity related to cluster trading on market efficiency and examine the mediating roles of these two variables in the relationship between noise trading and market efficiency. To measure the information asymmetry, Adj PIN and illiquidity related to cluster trading obtained from PSOS models were used. Also, market return based on trade volume imbalances was utilized as the indicator of market efficiency. The sample include 146 companies, which were listed in Tehran Stock Exchange between 2014 and 2020. The results showed significant inverse effects of information asymmetry and illiquidity related to cluster trading and market return. However, the effect of illiquidity related to cluster trading on market return was stronger than that of information asymmetry. In addition, the findings showed that noise trading had direct and significant effects on information asymmetry and illiquidity related to cluster trading. Thus, the relationship between noisy trading and market return through information asymmetry and illiquidity relevant to cluster trading, as well as the mediating roles of these two variables, was confirmed. Introduction Based on the previous research, liquidity is one of the fundamental factors affecting market efficiency and proper pricing of the capital assets (Wei, 2018; Ibikunle et al., 2016; Han, Tang, & Yang, 2016; Liu et al., 2019). On the other hand, one of the characteristics of an ideal efficient market is the lack of trading cost consequently leading to high liquidity. Stock liquidity can be suggested as an indicator for market return. It is broadly incorporated into the investigation of the effective factors presenting positive information (Rahmani, Hosseini, & Rezapour, 2019). Information asymmetry affects market value of the companies listed in the stock market (Muslim, 2021 & Setiawan). It can lead to wrong financial decision-makings of the management and reductions of the shareholders` wealth (Aflatooni, 2020). Information asymmetry concerning adverse selection occurs when one party of the deal enjoys more valuable information than the other party over the dealing process and this leads to an increase in trading cost (Hu & Prigent, 2017). Another important impact of information asymmetry on the market is the orientation of market performance toward disruption and inefficiency because the asymmetric information can affect market price fluctuations and the assets prices. Information asymmetry can reduce efficiency and prevent market formation in extreme cases, which make the two parties to the transaction lose in the end (Miskin, 2015). In the modern financial world, a great deal of trades is done unknowingly by disruptive traders, who enjoy a limited trading strategy based on rumors and other people's mere advice. These disruptive traders are called noisy traders whose major feature is the lack of adequate information in the transaction, i.e., their buying and selling are independent from the inherent value of the traded property (Han, Tang, & Yang, 2016; Peress & Schmidt, 2021). Nonetheless, we cannot say whether a trader has enjoyed his/her access to information in a particular trade only based on the empiric and routine levels of information about trades. In this circumstance, from the type of information, researchers usually speculate whether the trades have been based on information or not (Chung et al., 2013). Noises have always existed in financial markets. These noises, which are based on daily fluctuations in the stock price, are caused by factors like the spread of news or information, mass behavior, and/or fundamental parameters. Based on one important assumption of behavioral theory, trades of these noisy traders are not independent from each other and have a systematic correlation. Therefore, we cannot neglect their roles in and impacts on financial markets and construe them as the trivial part of the process of investing in those markets (Saranj et al, 2018). Information asymmetry is related to price clustering and cluster trades. In an efficient ideal market, price clustering and cluster trades are at their minimum possible levels. By cluster trades, we mean noisy traders’ tendency to do trades when there is no real and good quality information. With the increase of noisy trades in a time period, even knowable traders tend to trade more, while this gives noisy traders more incentive to do more trades, which in turn, leads to an increase in trade cost and a decrease in market efficiency (Duarte & Young, 2009). The findings of a study showed that due to the existence of noisy traders and spread of confidential information, knowable traders trade in a particular period after the spread of information and reduce their trades after its gradual effect on prices. This leads to the reduction of liquidity (market illiquidity) (Foster & Viswanathan, 1990). Therefore, it is expected that stocks go higher with information asymmetry, while the higher levels of cluster trades lead to less efficiency of the market (Hu & Prigent, 2019). Market efficiency is affected by several stock features, such as the market value, price volatility, trading volume, institutional trade, and trading cost. It is also influenced by trading cost due to information asymmetry and illiquidity due to cluster and noisy trades. Since no research has been done to investigate the impacts of information asymmetry and illiquidity concerning cluster trades on market returns in Iran Stock Exchange, this essay aimed to determine if the impacts of information asymmetry and illiquidity concerning cluster trades on the returns of companies listed in TSE market were based on a model that could show the degree of market efficiency and intended to answer these questions: do information asymmetry and illiquidity concerning cluster and noisy trades affect the market? Is the meditating role of illiquidity concerning cluster trades in the relationship between noisy trades and market returns confirmed in Iran stock exchange market? Method and Data To test the research hypotheses, 146 companies among those listed In Tehran Stock Exchange during the years of 2014-2020 were examined. To this goal, a multivariate regression model and pooled data were utilized. Findings The results displayed the significant inverse effects of information asymmetry and illiquidity related to cluster trading and market returns. The effect of illiquidity related to cluster trading was stronger than that of information asymmetry. In addition, the findings revealed that noise trading had direct and significant impacts on information asymmetry and illiquidity related to cluster trading. Thus, the relationship between noisy trading and market return through information asymmetry and illiquidity relevant to cluster trading and the mediating roles of these two variables were corroborated. Conclusion and discussion The results demonstrated that noisy trades reduced market efficiency by enhancing the trading and illiquidity costs due to information asymmetry and cluster trades, respectively. Information asymmetry and illiquidity affected market efficiency as independent variables, which gave us some evidence on the information motivation model. When new information enters the market, trades increase due to the initial advantage and motivation of using information as long as it is integrated into the stock price. However, the impact of information on the prices in the period of no new good-quality information (increase of noisy investigators’ trades due to concerns about liquidity) leads to enhancement of trading costs concerning illiquidity, which in turn, results in the reduction of market efficiency. Therefore, the supervising institution must pay attention to such factors as the accounting quality and information disclosure of the companies listed in TSE, as well as promotion of their supervising mechanisms in general. They should also take steps to making some policies for the growth and development of financial institutions active in the capital market like investment consulting firms, investment funds and companies, portfolio management, and financial information processing companies. In addition, the investors should pay attention to the management team qualities of companies responsible for preparing financial statements, company size, disclosure level, and growth opportunities as the factors affecting information asymmetry. This study aimed to investigate the effects of information asymmetry and illiquidity related to cluster trading on market efficiency and examine the mediating roles of these two variables in the relationship between noise trading and market efficiency. To measure the information asymmetry, Adj PIN and illiquidity related to cluster trading obtained from PSOS models were used. Also, market return based on trade volume imbalances was utilized as the indicator of market efficiency. The sample include 146 companies, which were listed in Tehran Stock Exchange between 2014 and 2020. The results showed significant inverse effects of information asymmetry and illiquidity related to cluster trading and market return. However, the effect of illiquidity related to cluster trading on market return was stronger than that of information asymmetry. In addition, the findings showed that noise trading had direct and significant effects on information asymmetry and illiquidity related to cluster trading. Thus, the relationship between noisy trading and market return through information asymmetry and illiquidity relevant to cluster trading, as well as the mediating roles of these two variables, was confirmed. Introduction Based on the previous research, liquidity is one of the fundamental factors affecting market efficiency and proper pricing of the capital assets (Wei, 2018; Ibikunle et al., 2016; Han, Tang, & Yang, 2016; Liu et al., 2019). On the other hand, one of the characteristics of an ideal efficient market is the lack of trading cost consequently leading to high liquidity. Stock liquidity can be suggested as an indicator for market return. It is broadly incorporated into the investigation of the effective factors presenting positive information (Rahmani, Hosseini, & Rezapour, 2019). Information asymmetry affects market value of the companies listed in the stock market (Muslim, 2021 & Setiawan). It can lead to wrong financial decision-makings of the management and reductions of the shareholders` wealth (Aflatooni, 2020). Information asymmetry concerning adverse selection occurs when one party of the deal enjoys more valuable information than the other party over the dealing process and this leads to an increase in trading cost (Hu & Prigent, 2017). Another important impact of information asymmetry on the market is the orientation of market performance toward disruption and inefficiency because the asymmetric information can affect market price fluctuations and the assets prices. Information asymmetry can reduce efficiency and prevent market formation in extreme cases, which make the two parties to the transaction lose in the end (Miskin, 2015). In the modern financial world, a great deal of trades is done unknowingly by disruptive traders, who enjoy a limited trading strategy based on rumors and other people's mere advice. These disruptive traders are called noisy traders whose major feature is the lack of adequate information in the transaction, i.e., their buying and selling are independent from the inherent value of the traded property (Han, Tang, & Yang, 2016; Peress & Schmidt, 2021). Nonetheless, we cannot say whether a trader has enjoyed his/her access to information in a particular trade only based on the empiric and routine levels of information about trades. In this circumstance, from the type of information, researchers usually speculate whether the trades have been based on information or not (Chung et al., 2013). Noises have always existed in financial markets. These noises, which are based on daily fluctuations in the stock price, are caused by factors like the spread of news or information, mass behavior, and/or fundamental parameters. Based on one important assumption of behavioral theory, trades of these noisy traders are not independent from each other and have a systematic correlation. Therefore, we cannot neglect their roles in and impacts on financial markets and construe them as the trivial part of the process of investing in those markets (Saranj et al, 2018). Information asymmetry is related to price clustering and cluster trades. In an efficient ideal market, price clustering and cluster trades are at their minimum possible levels. By cluster trades, we mean noisy traders’ tendency to do trades when there is no real and good quality information. With the increase of noisy trades in a time period, even knowable traders tend to trade more, while this gives noisy traders more incentive to do more trades, which in turn, leads to an increase in trade cost and a decrease in market efficiency (Duarte & Young, 2009). The findings of a study showed that due to the existence of noisy traders and spread of confidential information, knowable traders trade in a particular period after the spread of information and reduce their trades after its gradual effect on prices. This leads to the reduction of liquidity (market illiquidity) (Foster & Viswanathan, 1990). Therefore, it is expected that stocks go higher with information asymmetry, while the higher levels of cluster trades lead to less efficiency of the market (Hu & Prigent, 2019). Market efficiency is affected by several stock features, such as the market value, price volatility, trading volume, institutional trade, and trading cost. It is also influenced by trading cost due to information asymmetry and illiquidity due to cluster and noisy trades. Since no research has been done to investigate the impacts of information asymmetry and illiquidity concerning cluster trades on market returns in Iran Stock Exchange, this essay aimed to determine if the impacts of information asymmetry and illiquidity concerning cluster trades on the returns of companies listed in TSE market were based on a model that could show the degree of market efficiency and intended to answer these questions: do information asymmetry and illiquidity concerning cluster and noisy trades affect the market? Is the meditating role of illiquidity concerning cluster trades in the relationship between noisy trades and market returns confirmed in Iran stock exchange market? Method and Data To test the research hypotheses, 146 companies among those listed In Tehran Stock Exchange during the years of 2014-2020 were examined. To this goal, a multivariate regression model and pooled data were utilized. Findings The results displayed the significant inverse effects of information asymmetry and illiquidity related to cluster trading and market returns. The effect of illiquidity related to cluster trading was stronger than that of information asymmetry. In addition, the findings revealed that noise trading had direct and significant impacts on information asymmetry and illiquidity related to cluster trading. Thus, the relationship between noisy trading and market return through information asymmetry and illiquidity relevant to cluster trading and the mediating roles of these two variables were corroborated. Conclusion and discussion The results demonstrated that noisy trades reduced market efficiency by enhancing the trading and illiquidity costs due to information asymmetry and cluster trades, respectively. Information asymmetry and illiquidity affected market efficiency as independent variables, which gave us some evidence on the information motivation model. When new information enters the market, trades increase due to the initial advantage and motivation of using information as long as it is integrated into the stock price. However, the impact of information on the prices in the period of no new good-quality information (increase of noisy investigators’ trades due to concerns about liquidity) leads to enhancement of trading costs concerning illiquidity, which in turn, results in the reduction of market efficiency. Therefore, the supervising institution must pay attention to such factors as the accounting quality and information disclosure of the companies listed in TSE, as well as promotion of their supervising mechanisms in general. They should also take steps to making some policies for the growth and development of financial institutions active in the capital market like investment consulting firms, investment funds and companies, portfolio management, and financial information processing companies. In addition, the investors should pay attention to the management team qualities of companies responsible for preparing financial statements, company size, disclosure level, and growth opportunities as the factors affecting information asymmetry.

https://amf.ui.ac.ir/article_26753_4875cd23717f637e63c282fddcf3daf4.pdf