The Study of the Effect of the Board of Director's Independency on the Relationship between Information Asymmetry and Financial Reporting Quality of the Companies Listed in Tehran Stock Exchange

The purpose of this research is to investigate the effect of board of directors’ independency on the relationship between information asymmetry and financial reporting quality of the companies listed in Tehran Stock Exchange. To test the research hypotheses, the data of 135 companies listed in Tehran Stock Exchange during a ten- year-period (2004-2013) were analyzed using combinational data method and Eviews 6. The results indicate a negative significant relationship between board of directors’ independency and financial reporting quality and a positive significant relationship between board of directors’ independency and information asymmetry. That is, as board of directors’ independence increases, board efficiency increases too and the level of information asymmetry decreases afterward; besides, decreases in information asymmetry lead to increase in financial reporting quality. Moreover, the results show that board of directors’ independency affects the relationship between information asymmetry and financial reporting quality. In other words, it can be considered that board of directors’ independency is a moderating factor in the relationship between information asymmetry and financial reporting quality.