مجله پیشرفت های حسابداری
سال هفتم شماره 2 (پیاپی 69، پاییز و زمستان 1394)

Cash is considered as one of the most important items of current assets in the process of firm's and profit unit's operation administration. Although the cash represented in balance sheet is considered as an important asset for the company, over-holding this asset can be a sign of lack of efficiency in resource appropriation and it incurs costs for the company. The most important factor in surplus cash holding is information asymmetry and problems resulting from that. Information asymmetry means the lack of equal information among the two parties in a contract which creates two groups of people (aware and unaware), and it affects the relationships among the beneficiaries (stockholders and investors) of the company. In fact the results of studies carried out to investigate about the effective factors in current cashes in the companies show that by increasing information asymmetry, the amount of cash held by the companies increases. On the other hand, financial reporting quality is one of the effective factors in information asymmetry and its reduction. This research is going to present some evidence regarding the role of auditor's role (tenure and auditor size) and managerial ownership because they affect financial reporting quality and following that they can affect the amount of cash held in the company. The present research is post incidental. Regarding the goal, it is an applied study and regarding data collection, it is a descriptive research. We have used two methods of library and field study in order to collect data. To study the literature and research background, we have used library method. Regarding data collection and research data, we have used Rahawar-e-Novin 3 software and the official website for the bourse. To categorize and analyze the collected data in order to approve or reject the hypotheses, we have used regression method and Excel, SPSS and Eviews software. Results of statistic test of first research hypothesis regarding the relationship between auditor's tenure and cash holding level showed that this hypothesis was approved, in a way that it has been assessed to be negative. Results of the second hypothesis in this research, regarding the effect of auditor size on cash holding have been assessed to be positive and meaningful. Results of the third research hypothesis based on the effect of managerial ownership on cash holding level showed that this hypothesis was rejected. Discussion and The findings of the first hypothesis test confirm this hypothesis stipulating the existence of an association between auditor’s tenure and the level of cash holdings, so this relationship is negative. With regard to the fact that this study is the first research to examine this relationship, it is impossible to compare the results of this hypothesis with the results of other studies. In this hypothesis, the impact of control variables such as financial leverage, firm size, cash assets, return on capital, ratio of dividends, debt maturity structure, and cash flows on level of cash holdings were also tested. The results show negative and significant impact of firm size, cash assets, debt maturity structure, and the positive impact of cash flows on level of cash holdings; that is, the result of firm size variable is consistent with results of Mehrani et al (2013 A), Ebrahimian & Fallah (2012), Resayyan et al. (2010), Fakhkhari & Taghavi(2009) and expectations of research, but it is inconsistent with the studies of Al-Najjar (2013), García-Teruel et al. (2009), Ozkan and ozkan (2004) where they found this relationship were positive. Result of cash assets variable test is consistent with results of Mehrani et al. (2013 A), Ebrahimian & Fallah (2012), Resayyan et al. (2010), Al-Najjar (2013), García-Teruel et al. (2009), Ozkan and Ozkan (2004), Ferreira & Vilela (2004) and expectations of research, but it is inconsistent with the studies of Fakhkhari & Taghavi (2009) where they found this relationship to be positive. The result of debt maturity structure variable test is consistent with the results of research of Fakhkhari & Taghavi (1388) and expectations of research but it is inconsistent with results of Mehrani et al. (2013 A), Hassas Yeghaneh et al. (2011) and Ghaemi & Alavi (2012) which they found of no significant relationship. The result of cash flows based on positive and significant impact in this study is consistent with the results of Hassas Yeghaneh et al. (2011), Fakhkhari & Taghavi (2009) and but it is inconsistent with results of Mehrani et al. (2013) and Ghaemi & Alavi (2012) where they found no significant relationship. The reason for this difference in results can be attributed to differences in population and periods of study. In fact, although the results of this study are consistent with expectations of research, some of the same studies in different courses and communities have different results that could explain the existence of effective and hidden factors in these relationships in the courses of the test. The results of the second hypothesis test, based on the impact of auditor size on level of cash holdings are appraised positive and significant. As this study is the first research to examine this relationship, it is impossible to compare the results of this hypothesis with the results of other studies. But it should be noted that the result of this test is inconsistent with the results of the theoretical literature of a negative correlation between the two variables. Due to such a conclusion, it can be stated that the audit organization, as a big auditor due to busy work and an increase in clients in recent years, lost the efficiency of quality of financial reporting and this led to increases in the level of cash holdings in companies that have been audited by this organizations. The impact of the control variables in this hypothesis were found similar to the first hypothesis, meaning that the impact of firm size, cash assets, the maturity structure of liabilities and cash flows variables on level of cash holdings is significant. The results of the third hypothesis test based on an impact of management ownership on the level of cash holdings suggest the hypothesis is rejected. This result is inconsistent with the results of Ozkan and Ozkan (2004) and the theoretical literature. The reason for this is that (considering two opposing theories in this regard) in some companies, management ownerships have a positive impact, and in other companies, they have a negative impact on the level of cash holdings; as the review of the results of all of the companies show, these offset each other. With regards to control variables, the results in this hypothesis are similar to the two previous hypotheses with which they were compared.

Understanding cost behavior is one of the important issues in management accounting. Principles of flexible budgeting is based on proportionate changes of costs with regards to changes at activity level. So such budgeting method which would not consider the relationship of cost behavior and uncertainty condition may lead to significant variances. Optimum choice of flexible or committed resource is one of the most important problems of managers. “Integral to strategic cost management is the choice of procuring flexible versus committed resources conditioned on demand uncertainty” (Anderson et al. 2012). Prior research shows that costs respond less to decreases than increases in sales activity when firms invest in committed resources. Research Questions and Hypotheses This article concentrates on the role of demand uncertainty in cost behavior. The main question is: Is there a significant relationship between demand uncertainty and cost behavior? Hypotheses: In order to find the answer to questions, two hypotheses are made: H1: There is a positive relationship between demand uncertainty and cost of goods sold flexible behavior. H2: There is a positive relationship between demand uncertainty and sales, general and administrative expenses flexible behavior. The research method used in this article is multivariate regression analysis of the role of demand uncertainty in cost behavior of firms. We define cost behavior in terms of cost elasticity, which we consider it as the percentage change in costs for a one-percent change in sales. So, higher cost elasticity would indicate a more flexible cost structure. Sample The sample of this research is selected from the firms of Tehran stock exchange with constraints below: 1- Financial firms have not been selected for analysis. 2- Firms which their fiscal year end (1392/12/29) were selected. 3- Firms which do not have 3 year ahead data have not been selected. After considering the above conditions, 1340 firm-year observations were selected for analysis. Models Models (1) and (2) are considered to capture the relationship between demand uncertainty and cost behavior. Models (3) and (4) capture the relationship between cost changes and revenue changes. So the coefficients and are metrics of cost elasticity or cost stikinees. (1) Model (1) captures the relationship between demand uncertainty and cost of goods sold behavior. : Cost stickiness measure which is calculated by model (3) : Demand Uncertainty that is calculated by standard deviation of revenue changes. : Dummy variable (if salesit-1 > salesit-2 and salesit < salesit-1 equals 1; otherwise; equals 0) multiplied by log change of sales. (control variable) : Dummy variable (if salesit-1 < salesit-2 and salesit > salesit-1 equals 1; otherwise; equals 0) multiplied by log change of sales. (control variable) : Dummy variable (if salesit-1 < salesit-2 and salesit < salesit-1 equals 1;otherwise;equals 0) multiplied by log change of sales. (control variable) Model (2) captures the relationship between demand uncertainty and sales, general and administrative costs behavior. (2) : Cost stickiness measure which is calculated by model (4) : Demand Uncertainty that is calculated by standard deviation of revenue changes. : Dummy variable (if salesit-1 > salesit-2 and salesit < salesit-1 equals 1; otherwise; equals 0) multiplied by log change of sales. (control variable) : Dummy variable (if salesit-1 < salesit-2 and salesit > salesit-1 equals 1; otherwise; equals 0) multiplied by log change of sales. (control variable) : Dummy variable (if salesit-1 < salesit-2 and salesit < salesit-1 equals 1; otherwise; equals 0) multiplied by log change of sales. (control variable) Model (3) is regressed cross-sectionally in order to measure cost stickiness of cost of goods sold. (3) : Log change of cost of goods sold. : Log change of revenue : Dummy variable (if salesit < salesit-1; equals 1; otherwise; equals 0) multiplied by log change of sales. Model (4) is regressed cross-sectionally in order to measure cost stickiness of sales, general and administrative costs. (4) : Log change of sales, general and administrative costs. : Log change of revenue : Dummy variable (if salesit < salesit-1; equals 1; otherwise; equals 0) multiplied by log change of sales. Results of analyzing 1340 firms-year observations from the year 1382 to 1392, using multivariable regression analysis, indicate that demand uncertainty lowers the cost of goods sold rigidity. In other words, on the condition of increasing demand uncertainty, rigidity of the cost of goods sold is decreased and cost structure would become more flexible; but this significant behavior was not observed in the sales, general and administrative cost behavior. Results of testing the first hypothesis indicates that there is a positive and significant relationship between demand uncertainty and cost behavior. Positive sign of the coefficient means that higher demand uncertainty causes the COGS structure to become more flexible. Results of testing the second hypothesis indicate that changes of demand uncertainty cannot change the elasticity or behavior of sales, general and administrative costs. Discussion and Cost management in relation to production and sales is a critical factor for company success. Developing a cost management strategy requires the selection and support of a resource procurement plan (Anderson et al. 2012). The purpose of this article was to investigate the role of demand uncertainty in cost behavior. In our empirical analysis, we used firm-level data from Tehran Stock Exchange firms. Analysis of cost of goods sold indicates demand uncertainty causes more flexible structure and less cost rigidity. But analysis of sales, general and administrative costs indicates that there is no significant relationship between demand uncertainty and cost behavior. In other words, an increase in environment uncertainty cannot change the structure of sales, general and administrative costs significantly.

Changes in accounting principle and accounting errors are two broad scenarios that require the restatement of prior financial statements. Of course, not all restatements reflect manipulations. However, since 1998 the frequency of financial restatements increase. This event coincides with a major move by the SEC to limit earnings manipulations, and with the Stock market crash, which flushed out many reporting dishonesties. Many of the restating firms faced securities class action lawsuits, management and auditors replacement. These results suggest that many of the restatements involved more than technical accounting issues. Restatements frequently call into question the credibility of a firm’s prior financial reports, and are often accompanied by claims of securities fraud. Restatements cause investors and other external users to re-evaluate the firm’s future earnings. Also, Restatements lead to lose confidence in the quality of reported earnings. (Frieder and Shanthikumar, 2008). In other words it is expected that low quality of reported earnings lead to financial restatement in future years. Therefore, the main objective of this study is to investigate the impact of earnings quality on restatement of listed companies in Tehran Stock Exchange (TSE). Research Hypotheses Based on the theoretical literature and the conducted studies, research hypotheses were developed as follows. H1: There is a significant relationship between earnings quality and occurrence of restatement. H2: There is a significant relationship between earnings quality and magnitude of restatement. The research methodology is a quantitative research that uses the scientific method and empirical evidence, and based on hypotheses and research designs is done. The empirical data was collected from a panel consisting of 103 Iranian companies listed in the TSE, over the seven-year period of 2004 to 2010. Magnitude of restatement is measured using the amount of net income restatement. Accruals quality, earnings predictability and earnings smoothing are selected as earnings quality proxies. Logistic and multiple linear regression analysis were conducted to test the research hypotheses. The results of the analysis of regression models show that there is a negative relationship between proxies of earnings quality (accruals quality, earnings predictability and earnings smoothing) and occurrence of restatement. But, only the relationship between accruals quality and restatement occurrence is statistically significant. Also, there is a significant negative relationship between earnings quality proxies and magnitude of restatement. The additional results of our study show that leverage not only positively influenced the occurrence of restatement, but also positively related to magnitude of restatement. In addition, profitability negatively related to restatement magnitude, but there is no relationship between profitability and occurrence of restatement. However, our results show that firm size has no relationship with restatement occurrence and magnitude.

According to many theories of organizational coordination and combination, the organizational effectiveness is high in the organizations with high coordination among contextual, structural and strategic factors. This article provides a comprehensive model to fit between the financial strategy and lifecycle with organizational performance. The comprehensive model is based on the process outlook to the strategic financial management and organizational life cycle in which the strategic implementation is a function of formulation (focus of internal/external) and control (low/high). Research Questions or Hypothesis Coordination between financial strategy and life cycle leads to improvement of the financial performance. The research method based on results is developmental; based on objective it is descriptive-explanatory, and based on the method it is ex-post facto research. The statistical population was the companies admitted to the Tehran Stock Market whose stocks were transacted during the year 2009. One hundred and forty three companies were selected. The tool used for collection of the information and data was analysis of the companies’ audited financial statements and decisions of the annual ordinary general assembly meetings of shareholders at Tehran Stock Exchange. Descriptive statistical, and parametric and Non-Parametric methods were employed for summarization and analysis of the data, respectively. Results and Results show that, the mean performance (ROA, ROE, Q Tobin and profit margin) of the companies with coordinated financial strategy and organizational life cycle was higher than the companies lacking it. In other words, the coordination between financial strategy and life cycle leads to improve the organizational performance.

Forecasting daily securities exchange indices volatility is important in prediction of time series because volatilities in stock market are essentially dynamic, non-linear, complex, nonparametric and amorphous in nature (Kara and et al., 2011; Manish and Thenmozhi, 2005; Abu-Mostafa and Atiya, 1996). According to the risk of stock market securities in recent years, researchers in their studies introduce different models and algorithms for estimating and forecasting securities exchange indices volatility in order to help investors. However, none of these studies have provided non-linear online algorithms to predict indices volatility. Applying engineering approaches, investors can be protected against potential market risks and opportunities for speculators and arbitrageurs to make profit by trading in stock index. Clearly, being able to accurately forecast the stock market index has profound implications and significance for both researchers and practitioners. Therefore, in this study, we use a new engineering approach that accurately predicts stock market indices volatility. According to many factors that typically cause changes in economic phenomena, nonlinear online models have an important place in the economic literature of prediction models, and already they play an important role in modeling economic relations which are the key step in the short-term and long-term forecasts. (Moshiri and Morovat 1385). In this article, we evaluate the above hypothesis, and in particular to answer the question whether the anticipated volatility of Tehran securities stock indices using KLMS non-linear online algorithm is more accurate than the prediction of the Neural network algorithm based on the LMS? Research Hypothesis: Hypothesis 1: prediction volatility of KOL Index in Tehran securities exchange is more accurate than the prediction of the Neural Network algorithm based on the LMS by using KLMS algorithm. Hypothesis 2: prediction volatility of price and cash return index in Tehran securities exchange is more accurate than the prediction of the Neural Network algorithm based on the LMS by using KLMS algorithm. Hypothesis 3: Prediction volatility of industry index in Tehran securities exchange is more accurate than the prediction of the Neural Network algorithm based on the LMS by using KLMS algorithm. Hypothesis 4: Prediction volatility of Tehran securities exchange first market index is more accurate than the prediction of the Neural Network algorithm based on the LMS by using KLMS algorithm. Hypothesis 5: Prediction volatility of fifty top Companies index in Tehran securities exchange is more accurate than the prediction of the neural network algorithm based on the LMS by using KLMS algorithm. Hypothesis 6: Prediction volatility of financial intermediation index in Tehran securities exchange is more accurate than the prediction of the neural network algorithm based on the LMS by using KLMS algorithm. Hypothesis 7: Prediction volatility of Free Float Index in Tehran securities exchange is more accurate than the prediction of the Neural Network algorithm based on the LMS by using KLMS algorithm. Research Recent studies have shown that there is a nonlinear correlation in stock market indices. So in this study, we used the Kernel least mean square (KLMS) algorithm for prediction volatility of Tehran securities exchange indices, and compared its performance with the neural network algorithm based on the LMS in the short, medium and long term horizons. Prediction performance and reliability of the proposed algorithms are measured using Mean Square Error (MSE), Root Mean Square Error (RMSE), Normalized Mean Square Error (NMSE), Mean absolute difference (MAD), Directional Symmetry (DS), Correct up trend (CP), Correct down trend (CD). Based on the prediction volatility of Tehran securities exchange indices in short term time horizon (prediction volatility of next day), medium term (prediction volatility of next month) and long term (prediction volatility of next year) by using KLMS algorithm and neural network algorithm based on the LMS, it is concluded that the KLMS algorithm performances based on MSE, RMSE, NMSE and MAD in all indices are significantly less than the LMS algorithm. These results show that there is the lower deviation between the actual and predicted values ​​using the proposed KLMS algorithm. Also DS, CP and CD values ​​of KLMS algorithms in short term, medium term and long term horizons ​​are higher than neural network algorithm based on the LMS. This indicates that the appropriate prediction benchmark index is offered. Discussion and Comparing results of KLMS and neural network algorithm based on the LMS based on MSE, RMSE, NMSE, MAD, DS, CP, CD show that the performance prediction made ​​by KLMS is much more accurate than neural network algorithm based on the LMS. Because KLMS algorithm is nonlinear and online algorithm, while neural network algorithm based on the LMS is linear. In the online scenario where data is constantly changing, KLMS network size will grow steadily and implementation challenges will appear. Therefore, the proposed KLMS algorithm provides a good prediction of forecast error and forecast accuracy and can effectively detect and eliminate the noise in financial time series data and improve prediction performance. Overall, the results indicate the predictive power of the KLMS algorithm.

The government-owned corporations can be fully or partially owned by government. In the government-based economies, thepublicly owned corporations play significant roles in capital formation, financial planning and controlling of economic issues. In such economies, the relationship between a firm and government and the level of dependency of a company to the government are considered as important factors, which affect the firm’s value. Besides, it can be stated that the government-linked companies have weak law enforcement and lack of transparency in providing information. According to the percentage of major shareholders of listed companies, it is clear that state ownership, directly or indirectly is governing the majority number of companies at Tehran stock exchange. The theoretical accounting framework is a coherent system of inter-related objectives and fundamentals that should lead to consistent standards that prescribe the nature, function and limits of financial accounting and financial statements. [https://books.google.com/books? isbn=1844800296] It also provides information about the reporting entity’s financial performance and financial position that is useful to a wide range of users for making financial decisions. In this regards, income statement is one of the financial statements that will meet these objectives. Certainly, the use of profits reported by companies is important in evaluating the performance of business units. However, the use of estimates may affect the financial statement in such a way that the reported profit is significantly different from the actual one. In such situations, earnings quality, which refers to the usefulness of earning, would be a suitable criterion to evaluate the financial health of a firm. Research Questions or Hypothesis: The quality of earnings for different groups of financial statement users especially for shareholders, investors and creditors is very important and has a significant impact on their decision. Therefore, this study investigates the differences of earnings quality level reported by companies that have public and non-public major stockholders. To this end, this study attempts to find a proper answer to the vital question of how the level of reported earnings quality varies across public and non-public companies with emphasis on their major stockholders. The earnings quality is a theoretical concept and has a multidimensional orientation. In the current study, accruals quality, earnings persistence, earnings predictability, earnings smoothing, value relevance of earnings and earnings conservatism are considered as proxies of earnings quality and are selected based on the documented literature. Accordingly, in this study one main hypothesis and six subsidiary hypotheses are stated as follows: Hypothesis: There is a significant difference between the quality of earnings reported by public and non-public companies. 1)Type of ownership significantly related to accruals quality. 2)Type of ownership significantly related to earnings persistence. 3)Type of ownership significantly related to earnings predictability. 4)Type of ownership significantly related to earnings smoothing. 5)Type of ownership significantly related to value relevance of earnings. 6)Type of ownership significantly related to earnings conservatism. Using standard multiple panel regression each hypothesis is evaluated. To do this, the quality of earning is measured by the variables that are associated to the proxies of each subsidiary hypothesis. Independent variable is a type of ownership. Firm with state ownership is defined as the company that more than 50 percent of its shares belong to government. In this study, Quasi-governmental corporations are considered as public firms. Quasi-governmental corporations are those of corporations that are initially governmental but are named as private companies. Companies, which are not governmental or Quasi-governmental, are classified as non-public firms. Dependent variable is earnings quality that is measured by its six indicators as mentioned above. The required data set is obtained from Tadbirpardaz and Rahavardnovin database and website of the Tehran Stock Exchange. Eviews (6), Stata (12) and SPSS (17) softwares are utilized to analyze the hypotheses through the collected data. Based on the sample selection characteristics, 109 companies among listed companies of Tehran Stock Exchange for the period of 2002 to 2011 have been selected; through which 63 companies became public and 36 companies were categorized as non-public. Besides, 10 companies had changed their ownership structure during the period of this study. The findings indicate that public companies with public major stockholders have a low-level quality of accruals and earnings predictability. However, the stability of earnings, value relevance and conservatism are positively associated with state ownership. In addition, it is found that there is no significant relationship between earnings smoothing and type of ownership (major stockholders). Generally, this study documents evidence on the existence of significant difference of earnings quality among public and non-public firms. It is indicated that companies with non-public major stockholders have a higher level of earnings quality as compared to public companies. Therefore, from the point of financial information users’ view, information regarding firms’ ownership and political ties will be useful to obtain better assessments of the firms’ reported earnings quality. The results of this study are in line with the findings of Zhaoming et al. (2009) and Bushman et al. (2004) that found lower level of earnings quality for firms with political connections compared to companies that have no political connections.

Although, traditionally, accounting and marketing professionals are considered around the two poles of theoretical and practical, however, numerous studies show that the business environment for professional services is changing. On the one hand, the professional code of conduct prohibits auditors for closely interacting with customers and on the other hand the business environment for professional services, and intense competition in the industry, which will lead auditors to the marketing and customer orientation. Few studies have investigated this conflict. The very questions of the relationship between accounting and marketing have remained unanswered. In this regard, in order to fill the gaps in the research literature, this study examines how the auditors are balancing auditing with marketing. Hypotheses: Research hypotheses are developed as follows: H1. Auditors act to marketing through reducing audit fees H2. Auditors act to marketing through reducing audit quality H3. Auditors act to marketing through the loss of independence of the audit H4. Auditors act to marketing due to the difficulty of attracting business The data required for the research were gathered through a questionnaire distributed between members of IACPA. The questionnaire consists of four scenarios that every scenario was designed per hypothesis. 175 questionnaires were distributed and finally 142 questionnaires were collected. After collecting the questionnaires, T tests were used to test the hypothesis The first hypothesis was supported. In other words, auditors do marketing through reducing audit fees. The second hypothesis was not supported by the data. In other words, auditors don’t act to marketing through reducing audit quality. The third hypothesis was supported. In the other words, auditors do marketing through the loss of independence. The fourth hypothesis was supported. In the other words, auditors act to marketing when there is a difficulty of attracting business. The main objective of this study was to investigate the relationship between accounting and marketing. For this aim we replaced the variables in the four scenarios presented in the questionnaire. The results show that three hypotheses were accepted and we can say that auditors reduce fees for clients’ satisfaction; marketing is important from outward independence from the view point of auditors, and business attracting is more important than observation of code of conduct. Of course, one hypotheses wasn’t accepted and we can say that auditors don’t accept to reduce audit quality for marketing.

Decision making requires information and managers are always confronted with the problem of which information investors need for decision making. Every decision maker has a framework for his decision making based on his own mental structure; he encounters issues regarding his decision making framework as Stamp reports that one of the major difficulties in accounting standards development is lack of knowledge of decision making nature and logical process which decision maker attempts to access. The firm’s rate of return on investment is one of the main decision making criteria for investors and rate of return on investment calculation as a criterion for firm performance evaluation is obtained from information disclosed by the firm management. Cases of studies on information disclosure is summarized in the following pat; so it is concluded which information should be reflected in financial reports and how people process information for achieving their prediction and decision making regarding future uncertain events. Sing-Vey and Desay (1971) performed a research titled as ‘experimental quality analysis of financial disclosure by firms’ in USA. They argue that information disclosure by the firms may be in various forms and annual report to stockholders is an important form of periodical disclosure. They found that: Disclosure quality is better in large firms compared to smaller ones. Disclosure quality is better in the firms with higher number of stockholders. Disclosure quality is better in the firms audited by CPA institutes compared to the firms audited by small institutes. In the studies, there is a duality relationship between disclosure quality and stock return. While some studies have examined the effects of disclosure quality on stock return, other studies have examined the effects of stock return on disclosure quality. Reviewing the evidence of the validity of both approaches mentioned above, can mean that there is a bilateral (two-sided) relationship between these two variables. Accordingly the above question is raised: “Is there a bilateral relationship between disclosure quality and stock return?” In this regard, the goal of the present research is to study the bilateral relationship between disclosure quality and stock return in 127 listed companies of Tehran Stock Exchange (TSE) during 2003 to 2011. Research Hypotheses Based on the theoretical literature and the conducted studies, research hypotheses were developed as follows. First main hypothesis: There is a bilateral Significant relationship between disclosure quality and stock return The research methodology is a quantitative research that uses the scientific method and empirical evidence, and based on hypotheses and research designs has been set. This category of research is used when that criteria for measurement data quantitative and statistical techniques are used to derive the results. In this research, data of 127 companies are analyzed for the period of 2003-2011. At first, the bilateral relationship between the two variables was confirmed with granger causality test; then simultaneous equations system was estimated using two-step regression. The related data was collected through observation of Iranian database of Tehran Stock Exchange (Tadbir Pardaz) annual data files and the accompanying notes as found on www.rdis.com. For statistical analysis and to test hypotheses, descriptive statistics (i.e., mean, maximum, minimum and standard deviation) and inferential are used. The collected data was calculated using the Excel software and was analyzed using Eviews-7. The results of this research show that at a confidence level of 95%, there is bilateral relationship between disclosure quality and stock return of listed companies of TSE. In other words, the results of the simultaneous equation system have more reliability and validity than single-equation. Discussion and Financial information forms the evaluation basis in capital market. Financial statements contain very important information that shareholders use in making decisions related to investments in stocks. Appropriate disclosure in financial statements will be helpful in the decision extent that provides the possibility of predicting earnings trends, continuing profitability, management performance and so on. While some studies have examined the effects of disclosure quality on stock return, other studies have examined the effects of stock return on disclosure quality. The goal of present research was to study the bilateral relationship between disclosure quality and stock return in listed companies of TSE. It is recommended to encourage the companies having high-quality disclosures and charge the companies that have low-quality information disclosure given the importance of the quality of information disclosure on the exchange market. Thus, the regulators can affect the quality information disclosure (such as resource allocation in the economy and efficiency of information). Also, according to the bilateral relationship between stock returns and disclosure quality, we suggest considering these findings’ order to disclosure levels.