A Survey on the Relationship between Cost Reduction, Revenue Growth Strategies, and Sustained Earnings, Earnings Quality, and Earnings Response Coefficients

Document Type : Original Article

Authors
Ghodratolah Talebniya 1
Ahmad Yaghobnezhad 2
Mohsen Hamidian 3
1 Faculty Member of Islamic Azad University, Tehran Science and Research
2 Instructor at Islamic Azad University, Tehran Science and Research
3 Ph.D Student of Accounting Islamic Azad University, Tehran Science and Research (Corresponding author)
Abstract
A survey on the relationship between cost reduction, revenue growh strategies, and sustained earnings, earnings quality, and Earnings response coefficients in listed companies in Tehran Stock Exchange, The target of this survey is to show that the companies which achieve and report sustained increase of earnings through revenue growth strategy, have more stable earnings, higher quality of earnings, and response coefficients than those companies which achieve and report sustained growth of earnings through cost reduction strategy.
    Population of this survey is about 434 companies listed in Tehran Stock Exchange. We have explored 298 companies for 3 years (1384-1387). Result show that companies with revenue growth strategy have more stable earnings, higher quality of earnings, continued earnings, and also higher response coefficients.
    Finally, it was shown that both quality of earnings and earnings response coefficient are higher when sustained increase in earnings is obtained by both sustained increase in revenue and operating earnings. The hypothesis is confirmed only for companies with three consecutive years increase in operating earnings for each share not companies with less than three consecutive years of increased operating earnings.
Keywords
Revenue Growth Strategy
Cost Reduction Strategy
Sustained Earnings
quality of earnings
Earnings Response Coefficient