The effects of cash flows and accruals on the share price in Jordan with special reference to financial crisis: audit quality as a moderator
Effect of accounting information on the share price has been having the share of attention from researchers for over six decades owing to the increasing of global financial crisis. Hence, this study attempts to contribute to literature by investigating such relationship in Jordan, a developing co...
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| Format: | Thesis |
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| Language: | English |
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| Online Access: | http://dspace.unimap.edu.my:80/xmlui/bitstream/123456789/76730/1/Page%201-24.pdf http://dspace.unimap.edu.my:80/xmlui/bitstream/123456789/76730/2/Full%20text.pdf http://dspace.unimap.edu.my:80/xmlui/bitstream/123456789/76730/3/Declaration%20Form.pdf |
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| Summary: | Effect of accounting information on the share price has been having the share of attention
from researchers for over six decades owing to the increasing of global financial crisis.
Hence, this study attempts to contribute to literature by investigating such relationship in
Jordan, a developing country. Specifically, this study investigates the relationship
between the cash flow and accruals on share price of listed companies on Amman stock
Exchange for the year 2002 to 2014 also the effect of financial crisis on the share price
before and after 2008. The model of this study was theoretically founded on both the
agency and the signaling theories. To examine the developed model, the required data
were gathered from the annual reports of 236 listed firms. In analyzing the data, this study
utilized the panel data methodology on 117 companies with 1521 observations.
Moreover, this study used audit quality (audit firm size and audit tenure) as moderating
variable. Based on the panel data results, the fixed effect model was used to examine the
effect of the cash flows and accruals on the share price. The accruals and cash flows
combined have significant effects on the share prices of the Jordanian companies listed
on ASE and that they together explain 40.93% of the variations in these prices. In
addition, the study found that the cash flows have a significant effect on the share prices
of the Jordanian companies listed on ASE and that the operating cash flows (OCFs),
financing cash flows (FCFs), and investment cash flows (ICFs) together explain 13.27%
of the variations in these prices. Whereas the OCFs have positive effect on the share prices
of these companies, the effect of FCFs is negative. On the other hand, the accruals
(aggregate accruals (AGGAs), current accruals (CAs), and total accruals (TAs)) have a
statistically-significant, positive effect on the share prices of the Jordanian companies
listed on ASE and CAs, TAs and AGGAs, together explain 38.92% of the variations in
these prices. Audit quality, whether auditor’s firm size or auditor’s tenure, has significant
moderating effect on associations of the share prices with accruals and with cash flows
and the 2008 financial crisis had negative effects on share prices of the Jordanian
companies listed on ASE. Besides providing suggestions for future research work, this
study provides deep insights into relative usefulness of cash-based and accrual-based
accounting measures and assist investors, regulators, analysts, and other stakeholders in
evaluating the liquidity and financial performance of Jordanian companies listed on ASE,
which may result in better allocation of economic resources by enabling the investors to
take informed investment decisions, thus promoting a more efficient Jordanian capital
market. |
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