The effects of components of accruals on the relationship between external financing activities and future stock returns in the Companies Listed in Tehran Stock Exchange

The main objective of this research is identifying the impact of accruals components on the relationship between external financing activities and future stock returns of listed companies in Tehran Stock Exchange. The period of this research is twelve years (2000-2011). In this paper, the factors affecting the relationship between these abnormalities have been distinct that include managerial market timing, opportunistic earnings management, agency-related Overinvestment, risk induced by changes in the mix of growth options and assets and distress risk, and for testing this hypothesis we have used multivariable regression models. The analysis results show that external financing activities do not have the ability to predict future stock returns after controlling of the total accruals, working capital accruals and long-term accruals; and external financing anomaly is not statistically significant. In addition, the presence of long-term accruals determined that these abnormalities occur in the market. The results indicate that the agency-related Overinvestment can be interpreted of the relation to the explanation for these anomalies and is compatible with it. According to this hypothesis, managers can invest the net cash proceeds from external financing activities in projects with zero or negative net present value for personal interests.