The effectiveness of investors' decision-making from legal requirements in the capital market

Document Type : Original Article

Authors

1 Ph.D Candidate of Accounting, Shahid Bahonar University of Kerman, Kerman, Iran.

2 Professor, Department of Accounting, Shahid Bahonar University of Kerman, Kerman, Iran

3 Professor, Department of Accounting, Shahid Bahonar University of Kerman, Kerman, Iran.

Abstract

Purpose: Most economic and financial theories are based on the assumption that investors act rationally when making decisions, which is consistent with the theory of rational economic man. Investors typically consider all aspects before making decisions, aiming to choose the most sensible option. However, factors can sometimes lead to irrational behavior and impact decision-making, often due to inefficiencies in financial markets. One of the key roles of capital market supervisory bodies is to control fluctuations, using various tools and laws to do so. The stock exchange organization oversees companies through supervisory mechanisms. The purpose of this research is to examine the mechanisms of holding news conferences, issuing clarification announcements regarding stock price fluctuations, addressing rumors, and suspending trading symbols.
Method: The statistical population for this research includes all firms listed on the Tehran Stock Exchange from 2015 to 2022. Data necessary for this study was gathered from the information bank of the Tehran Stock Exchange and Securities Organization (Codal) and Rahvard Novin software. Excel software was utilized for data collection and organization, while SPSS and Eviews were used to test hypotheses and analyze findings. This research follows an event study design, with the t-test being the most commonly used statistical test for such studies. The study focuses on evaluating legal requirements in the capital market by examining transaction volumes, announcements for news conferences, clarification of stock price fluctuations, dispelling of rumors, and trading symbol suspensions.
Findings: The results of the research hypotheses test showed that holding a news conference and a clarification announcement about the rumor does not affect investors' decision-making. In addition, the analysis of the research data indicates that the clarification announcement regarding the stock price fluctuation and the clarification announcement regarding the rumor and stoppage of the trading symbol affects the investors' decision-making.
Conclusion: Conclusion: One of the most significant factors contributing to the lack of influence of news conferences and clarification notices on investors' decisions is the deficiencies in the information system and the low efficiency of the Tehran Stock Exchange market. Additionally, investors' lack of specialized knowledge plays a role in this phenomenon. Investors in the stock market tend to prioritize information related to the price, yield, and performance of companies' shares over news published by media outlets. To promote investment in stock markets, countries must provide better information to investors. This can be achieved by enhancing the requirements set by stock market monitoring organizations and developing a framework for evaluating policies and procedures with the support of governments. Based on the research findings, it is recommended that the Stock Exchange and Securities Organization, as the regulatory body, and the Stock Exchange and Securities Company, as the executive entity of the capital market, review and revise the rules and regulations governing the market.

Keywords

References

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Financial Management Perspective
Volume 14, Issue 45
2024
Pages 9-36

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