The relationship between the quality of earnings predictions and earnings response coefficient and the ownership's centralization in companies listed in Tehran Stock Exchange

Most of the stock price changes in capital markets are influenced by various and differentiated information released by companies to market participants. Some of this information is based on forecasting and estimating, therefore in this paper the comparison of earnings response coefficient (ERC) in companies with optimistic management earning forecasts with companies with management’s policies to forecast pessimistically to be able to survey the reaction of market participants to management’s optimistic and pessimistic forecasts. In the rest of the research, the effects of the adjusted changes in management’s forecasts of earnings during the financial period were examined and finally the forecasts of managements in high centralized and low centralized companies were examined. The results suggest that in Tehran Stock Exchange, there is no significant relationship between ERC of companies with optimistic forecasts and companies with pessimistic forecasts. The negative relationship between the positive adjustments in managements earning forecasts and ERC was verified and managements earning forecasts in companies with low centralized ownership comparing to companies with high centralized ownership were more optimistic.