The Relationship between Accounting Earning Quality and Stock Returns

This study investigated the relationship between the quality of earnings and stock returns of the listed companies on Tehran stock exchange. In order to do this, the measures of Gross profit, Return on Capital Employed, Productive Asset Reinvestment Ratio, Value Relevance and Conservatism were used. Then field survey by the use of correlation and regression analysis(Francis 2006) and hypotheses testing was employed on real input of 79 accepted companies m Tehran stock exchange during the 5 years 1384 to 1388.
Results indicate that there is a significant relationship between the indicators of Gross profit, Return on Capital Employed and Value Relevance as three factors used in this study. However a significant relationship between the indicators of Value Relevance and Conservatism is not proved.