Management Commentary and the Value Relevance of Earnings: The Accreditation Role of Independent Auditors

Document Type : Original Article

Author

• azam Valizadeh Larijani

Assistant Professor, Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran.

10.22067/ijaaf.2025.46059.1511

Abstract

A management commentary is a descriptive report on the various aspects of a company's operations that can provide useful information to investors. According to the regulations of the Securities and Exchange Organization of Iran, the companies' board of directors has been mandated since 2017 to prepare and submit management commentary. This report has been designed as an essential element in offering information to the capital market and improving the usefulness of the information companies provide. The present study, therefore, aims to investigate the effects of issuing regulations for management commentary on the value relevance of earnings. Considering that these reports must be audited and disclosed at specific intervals, the present study also examines the interactive effect of audit quality and the issuance of regulations for management commentary reporting on the value relevance of earnings. The statistical population of this study includes companies listed on the Tehran Stock Exchange (TSE) and Iran Fara Bourse (IFB) from 2012 to 2023. A linear regression model was used to test the study hypotheses.

The results show that issuing regulations to present management commentary has increased the value relevance of companies' earnings. In other words, after these regulations were issued, the quality of companies' earnings increased. Based on the results obtained, audit quality also enhances the effect of issuing rules for management commentary reporting on the value relevance of earnings; that is, when the audit quality is higher, issuing regulations for management commentary reporting has a more significant potential to improve the earnings quality.

Keywords

• Management commentary
• value relevance of earnings
• audit quality

Main Subjects

• Accounting

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