M.A. Thesis:

Stock return volatility and working capital accruals

Understanding the characteristics of the accruals is one the chief aims of financial accounting. The accruals not only are an integral part to profitability, but also if we have a deeper look at the nature of accruals, we will find characteristics in them in which the descriptive power of the investment theory based on the true transaction option for accruals is strengthened. On the one hand, little empirical information is available regarding the effect of the economic factors on the level of company accruals. The present study targets at investigating the relationship between stock return volatility and the working capital accruals in Tehran Stock Exchange. The sample of this study consists of 183 companies within a period of 6 years (2010-2016). The hypothesis was tested through multivariate regression based on the combinational (panel) data. The tests were made using Spss21 and Eview9. The results indicate that there is a negative and significant relationship between stock return volatility and the working capital accruals and the net asset component of the working capital accruals in relation to volatility of debt component were more sensitive but this relationship is not significant. However, the financial distress and the operation cycle of the company, as the modifier variables, do not significantly affect on the relationship between the stock return volatility and the working capital accruals. Also, there is a significant and positive correlation between the unexpected turnover accruals from the accrual model and the profit investment management.

Keywords: Working Capital Accruals, Stock Return Volatility, Financial Distress, Operation Cycle, Profit Manag