Forward-looking disclosure and corporate reputation as mechanisms to reduce stock return volatility

Subject Areas :

Mohammad Kiamehr ¹ , Ehsan Kermani ² , Ali Norouzi ³

1 - Department of Accounting, Dariun Branch, Islamic Azad University, Dariun, Iran
2 - Department of Accounting, Dariun Branch, Islamic Azad University, Dariun, Iran
3 - Department of Accounting, Shiraz Branch, Islamic Azad University, Shiraz, Iran

Received: 2024-03-06 Accepted : 2024-05-02 Published : 2024-02-20

Keywords: Corporate reputation, forward-looking financial disclosures, volatility of stock returns,

Abstract :

Purpose: The purpose of this research is to investigate the relationship between the disclosure of prospective financial information and the volatility of stock returns of companies listed on the Tehran Stock Exchange, as well as to investigate the effect of companies' good reputation on this relationship. Methodology: In order to achieve the goals of the research, two hypotheses have been developed that test the meaningfulness of the relationship between the disclosure of prospective financial information, the fluctuations of stock returns and good reputation in the companies listed on the Tehran Stock Exchange. Disclosure of prospective financial information was measured using content analysis method. The statistical method used to test the hypotheses presented in this research is the step-by-step regression analysis method, and the statistical sample of the research includes 120 companies in the years 2018 to 2022. Findings: The results of the analysis of the research hypotheses show that the disclosure of forward-looking financial information leads to a decrease in the volatility of stock returns of companies listed on the Tehran Stock Exchange. Also, disclosure of forward-looking financial information by firms with higher reputations (as opposed to firms with lower reputations) has a greater effect on reducing stock return volatility. Originality: By analyzing the effect of forward-looking financial information on the volatility of stock returns, it expands previous research.

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