Exploring the Relationship between Disclosure Quality and the Performance of Tehran Stock Exchange Companies Using a Simultaneous Equations System

The so far studies، reveal a dual relationship between disclosure quality and firm performance. While some studies have examined the effects of disclosure quality on firm performance، other studies have examined the effects of firm performance on disclosure quality. Reviewing the evidence of the validity of both approaches means that there is a bilateral (two-sided) relationship between these two variables. In this regard، the goal of present research is to study the bilateral relationship between disclosure quality and performance of 149 companies listed on Tehran Stock Exchange (TSE) during 2004 to 2010. At first، the bilateral relationship between two variables was confirmed using Granger causality test and then simultaneous equations system was estimated using two-step regression. Based on the results، there is bilateral relationship between disclosure quality and performance of the companies listed on the TSE. In other words، the results of the simultaneous equation system have more reliability and validity compared to single-equation system.