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<p style="text-align:justify;">This research investigated the relationship between earnings before interest and taxes and operating cash flow and shareholders’ return in Abadan and Arak Petrochemical Companies. This relationship was tested under the condition of information asymmetry. Nonlinear Markov-Switching approach was adopted to test the hypotheses. The results of empirical tests through the data in 2001-2010 indicated that in Arak Petrochemical Company, both variables of earnings before interest and taxes and operating cash flow had significant relationship with stock return of company. However, in Abadan Petrochemical Company, only the variable of earnings before interest and taxes had significant and positive relationship with stock return of company. Increase in information asymmetry showed that variable of operating cash flow had a stronger relationship with stock return of companies than the variable of earnings before interest and taxes. In other words, under the condition of information asymmetry, cash flow variables had higher correlation with stock return of companies than accrual variables.</p>

MBR_Volume 2_Issue 1_Pages 74-88.pdf

Original Research 

MBR.2015.60316.xml

Issue

The Relationship between Earnings before Interest and Taxes and Operating Cash Flow and Stock Return under the Condition of Information Asymmetry in Abadan and Arak Petrochemical Companies through Markov-Switching Approach

<p style="text-align:justify;">This study examined the relationship of organizational strategic system’s traits including family management, CEO compensation, and tenure of managing director with corporate financial performance. To measure financial performance, Tobin’s Q and ROA measures were used. Financial performance can be affected by different factors among which organizational strategic system´ s traits can be the most important ones. To do this research, 193 listed firms in Tehran Stock Exchange were studied from 2011- 2015. For testing data consistency, Hardi test, for testing the hypotheses, panel regression, and for selecting among combined models, fixed and random effects, Hausman test were used. Results showed a negative and significant correlation of family management and financial performance with both Tobin’s Q and ROA. In addition, there was no significant correlation between CEO compensation and financial performance when the performance measure was Tobin’s Q, but when it was ROA, there was a significant correlation between them. Moreover, there was no significant correlation between tenure of managing director and financial performance with both Tobin’s Q and ROA.</p>

Examining the Effect of Organizational Strategic System’s Traits on Financial Performance

mbrq.2017.02.05.xml