The Effects of Accounting Earnings Quality on Size of Stock Repurchases and Future Operating Performance

2018 ◽  
Vol 43 (6) ◽  
pp. 147-185
Author(s):  
Kyung Soon Kim ◽  
Seong In Moon ◽  
Ji Su Kang ◽  
Seon Min Bae
Keyword(s):  
Earnings Quality ◽  
Operating Performance ◽  
Stock Repurchases ◽  
Accounting Earnings

scholarly journals Heterogeneity in earnings quality between different classes of companies after IFRS adoption: evidence from Brazil

2017 ◽  
Vol 28 (73) ◽  
pp. 113-131
Author(s):  
Roberto Black ◽  
Sílvio Hiroshi Nakao
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Earnings Quality ◽  
Economic Incentives ◽  
Net Income ◽  
Accounting Earnings ◽  
Ifrs Adoption ◽  
Before And After

ABSTRACT This paper aims to investigate the existence of heterogeneity in earnings quality between different classes of companies after the adoption of the International Financial Reporting Standards (IFRS). IFRS adoption is generally associated with an increase in the quality of financial statements. However, companies within the same country are likely to have different economic incentives regarding the disclosure of information. Thus, treating companies equally, without considering the related economic incentives, could contaminate earnings quality investigations. The case of Brazil is analyzed, which is a country classified as code-law, in which tax laws determined accounting practice and in which IFRS adoption is mandatory. First, Brazilian companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) were separated into two classes: companies issuing American Depositary Receipts (ADRs) before IFRS adoption and companies that did not issue ADRs until the adoption of IFRS. Then, this second class of companies was grouped, using cluster analysis, into two different subclasses according to economic incentives. Based on the groups identified, the quality of accounting earnings is tested for each class of the companies before and after IFRS adoption. This paper uses timely recognition of economic events, value relevance of net income, and earnings management as proxies for the quality of accounting earnings. The results indicate that a particular class of companies began showing conditional conservatism, value relevance of net income, and lower earnings management after IFRS adoption. On the other hand, these results were not found for the two other classes of companies.

scholarly journals ANALISIS PENGARUH BOOK-TAX CONFORMITY TERHADAP PERSISTENSI LABA

2017 ◽  
Vol 14 (2) ◽  
pp. 101-127
Author(s):  
Cathlin Feidy ◽  
Synthia Madya
Keyword(s):  
Stock Exchange ◽  
Earnings Quality ◽  
Linear Regression Analysis ◽  
Tax Compliance ◽  
Financial Statements ◽  
Earnings Persistence ◽  
Manufacturing Companies ◽  
Analysis Method ◽  
Accounting Earnings ◽  
The Difference

The difference between accounting earnings and taxable income in the research have been debated extensively. The difference raises two different perspectives, proponents of increased book-tax conformity argue that tax compliance will increase and earnings quality will improve. Opponents argue  that earnings quality will decline. The objective of this research is to analyze and to obtain empirical evidence about the effect of book-tax conformity on earnings persistence in manufacturing companies which is listed on Indonesian Stock Exchange (IDX) in 2010-2014. This research’s data is obtained from company’s audited financial statements that have been published. This research has a total of 340 samples. Hypothesis examination in this research is done by using linear regression analysis method. The hypothesis examination uses loss and earnings variance as control variables. Result of the hypothesis examination shows that book-tax conformity effects the earnings persistence, consistent with the research’s hypothesis, and the effect is positive. It means that higher book-tax conformity may result in higher earnings persistence. The result also shows that loss is less persistence and earnings variance is not effect the earnings persistence.

The impact of earnings management on the value relevance of earnings

2017 ◽  
Vol 32 (1) ◽  
pp. 50-74 ◽  
Author(s):  
Wael Mostafa
Keyword(s):  
Earnings Management ◽  
Value Relevance ◽  
Operating Performance ◽  
Accounting Earnings ◽  
Content Type ◽  
Earnings Response Coefficient ◽  
Response Coefficient ◽  
Data Limitations ◽  
Earnings Response ◽  
The Impact

Purpose This paper aims to examine the association between earnings management and the value relevance of earnings (the latter is operationalized by earnings response coefficient). Specifically, this study examines whether opportunistic earnings management has a negative impact on the value relevance of earnings for a sample of firms listed on the Egyptian Stock Exchange. Design/methodology/approach Different from prior work and due to data limitations in the Egyptian market, this paper first examines for the existence of earnings management based on the whole operating performances of the firms by testing whether firms with low/poor operating performance are more likely to choose income-increasing actions (strategies) than firms with high operating performance. After confirming that low operating performance firms manage earnings upward, the authors then assess whether this opportunistic earnings management by these low operating performance firms reduces the value relevance of earnings. This is performed by estimating a model of the relationship between stock returns and accounting earnings with a dummy variable that allows parameter shifts for earnings of low operating performance firms. Findings The results show that discretionary accruals are positive and significantly higher for firms with low operating performance than those for firms with high operating performance. These results indicate that low operating performance firms increase the earnings management practices by probably increasing their reported earnings opportunistically to mask their low performance. Furthermore, the results show that the earnings response coefficient is significantly smaller for earnings of low operating performance firms than that for earnings of high operating performance firms. These results suggest that earnings of firms with low operating performance (that are engaged in opportunistic earnings management strategies) have less value relevance than earnings of firms with high operating performance, i.e. the informativeness of managed earnings is lower than that of non-managed earnings. Practical implications Based on these results, it is plausible that the presence of opportunistic earnings management adversely affects the value relevance of accounting earnings. Originality/value Consistent with previous results from developed countries, this study shows that earnings management is a significant factor that affects value relevance of earnings in Egypt.

scholarly journals Mandatory IFRS Adoption and Earnings Quality: Evidence from the UK

2018 ◽  
Vol 12 (11) ◽  
pp. 197
Author(s):  
Mohammad Issa Almaharmeh ◽  
Ra’ed Masa’deh
Keyword(s):  
Stock Exchange ◽  
Earnings Quality ◽  
Accounting Standards ◽  
High Quality ◽  
Accounting Earnings ◽  
Ifrs Adoption ◽  
Accounting Numbers ◽  
Mandatory Adoption ◽  
The Uk

This study examines the effect of mandatory IFRS adoption on the quality of accounting earnings for the firms listed in London Stock Exchange. After examining 9056 firm year observations for the period from 1994 to 2013 the results suggest that the mandatory adoption of IFRS leads to higher earnings quality. This study extends the current literature that examines the consequences of mandating IFRS adoption in the UK and shows that adopting high quality accounting standards leads to high quality accounting numbers.

The Audit Committee and Earnings Quality

1996 ◽  
Vol 11 (2) ◽  
pp. 247-276 ◽  
Author(s):  
John J. Wild
Keyword(s):  
Economic Theory ◽  
Empirical Evidence ◽  
Research Design ◽  
Financial Reporting ◽  
Audit Committee ◽  
Earnings Quality ◽  
Nondecreasing Function ◽  
Accounting Earnings ◽  
Before And After

This paper provides empirical evidence on the association between audit committee formation and the quality of accounting earnings. The audit committee is responsible for overseeing the financial reporting and auditing process of the firm. This paper assesses the effectiveness of the audit committee in discharging these responsibilities by comparing the quality, or informativeness, of earnings reports before and after audit committee formation. For this paper, informativeness is measured by the extent to which the market reacts to the release of earnings reports. Economic theory predicts that the magnitude of the market's reaction to earnings is a nondecreasing function of earnings quality. The results show a significant increase in the market's reaction to earnings reports subsequent to the formation of the audit committee. Specifically, the reaction to earnings reports is more than 20 percent greater after the formation of the committee than before. These findings are robust to alternative variations in the research design. Overall, the evidence is consistent with the audit committee providing meaningful oversight of the financial reporting and auditing process.

Sign in / Sign up

Export Citation Format

Share Document