The Reaction of Investors to Earnings, Cash Flows and Accruals Forecast in Tehran Stock Exchange

This paper examines the reaction of investors to earnings, cash flows and accruals forecast in Tehran Stock Exchange (TSE). According to a sample of 230 listed firms companies between 1379 and 1385, the results show that investors correctly react to earning forecast, but not as much as cash flows. It mean, after prediction year, the firms with reported earning more than predicted earning experience an increasing price in result of increasing demand and the stock return was more than average return of the firms. And the firms with reported earning less than predicted earning have experience a return less than average return of firms. Also the results show that investors correctly react to cash flow forecast. Finally the results indicate that, when realized accruals are more than predicted accruals or when realized accruals are less then predicted ones the investor have not reacted correctly. May market fails to fully reflect the predictive ability of accrual and cash flows.