Relationship between Earnings Quality and Stock Returns in Tehran Stock Exchange

Current work aims at investigating effect of earnings quality on stock return. Five criteria were considered for earnings quality measurement. Then effect of the criteria on stock return was studied separately. Statistical population included 68 companies listed in Tehran Stock Exchange. Regression, correlation coefficient and Kolmogorov – Smirnov methods were used for testing hypotheses. Findings indicated there is positive relationship between earnings quality and stock return and relationship between earnings quality measurement criteria with stock return was as follows (from strong to weak): 1. Third criterion (stability of reported earnings), 2. First criterion (relationship between operating cash flow to operating profit), 3. Second criterion (potential expected profit), 4. fourth criterion (total liabilities), 5. Fifth criterion (quality of working capital accruals).