Understanding earnings quality: A review of the proxies, their determinants and their consequences
2010; Elsevier BV; Volume: 50; Issue: 2-3 Linguagem: Inglês
10.1016/j.jacceco.2010.09.001
ISSN1879-1980
AutoresPatricia Dechow, Weili Ge, Catherine M. Schrand,
Tópico(s)Corporate Finance and Governance
ResumoResearchers have used various measures as indications of “earnings quality” including persistence, accruals, smoothness, timeliness, loss avoidance, investor responsiveness, and external indicators such as restatements and SEC enforcement releases. For each measure, we discuss causes of variation in the measure as well as consequences. We reach no single conclusion on what earnings quality is because “quality” is contingent on the decision context. We also point out that the “quality” of earnings is a function of the firm’s fundamental performance. The contribution of a firm’s fundamental performance to its earnings quality is suggested as one area for future work.
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