The effect of business strategies on profit response coefficient in companies listed on Tehran Stock Exchange

The earnings reaction coefficient measures the unexpected return of the market in response to unexpected components of earnings reported by the company that issued the securities. Therefore, the different reactions of investors to profit information cause different reactions of the market. The purpose of the present study is to investigate the effect of business strategies on the profit response coefficient in companies listed on the Tehran Stock Exchange. In this research, the information of 87 companies admitted to the Tehran Stock Exchange in the period between 1392-1399 was used to test the hypotheses. The results of the research indicated that there is a negative and significant relationship between the business strategy of cost leadership and the reaction coefficient of profit, and also there is a negative and significant relationship between the business strategy of product differentiation and the reaction coefficient of abnormal stock return to profit and the reaction coefficient of cumulative abnormal return of stock to profit. There is, but no significant relationship was found between the business strategy of product differentiation and the reaction coefficient of stock return to profit. The results of the present research can be useful in reducing the occurrence of sudden financial crises in the economy.