PURPOSE: This study examines whether earnings quality is associated with changes in firms' cash-to-total-assets ratio, and whether institutional ownership conditions that association, in an emerging market with concentrated ownership and high inflation.
DESIGN/METHODOLOGY/APPROACH: We use a balanced panel of 65 non-financial Tehran Stock Exchange firms over 1391-1401 (2012-2022; 715 firm-years), selected from 327 listed firms by systematic elimination. The dependent variable is the proportional change in the cash ratio, (CTA_t-1 - CTA_t)/CTA_t-1, so increases in cash lower its value. Earnings quality is the dispersion of Dechow-Dichev (2002) accrual residuals (higher = poorer quality). Fixed-effects panel least squares are estimated in EViews 10.
FINDINGS: Poorer earnings quality is associated with larger increases in the cash ratio (p < 0.001). The earnings quality x institutional ownership interaction is negative and significant: the association is stronger where institutional ownership is higher, and the conditional effect keeps its sign over the observed ownership range. The interaction does not raise adjusted R-squared (0.7325 to 0.7313), and capital expenditure and net working capital are insignificant in the extended model.
RESEARCH IMPLICATIONS: The results are conditional associations, not causal effects: endogeneity, survivor-selected sampling, incomplete ownership records and a change-based dependent variable limit inference. Institutional owners in Iran include state-affiliated and related-party holders, so the pattern is not evidence of arm's-length monitoring.
ORIGINALITY/VALUE: We are not aware of earlier Tehran Stock Exchange evidence combining a Dechow-Dichev earnings-quality measure with institutional ownership in a cash-ratio model; the contribution is limited to documenting and carefully interpreting these associations.