Using the Qualitative Characteristics of Financial Reporting for Evaluating Earning Quality

Subject Areas : Futurology

هاشم Nikoomaram ¹ , A. Modaress ² , M. R. Shoorvarzy ³

1 - ندارد
2 - ندارد
3 - نویسنده مسئول یا طرف مکاتبه

Received: 2008-10-30 Accepted : 2009-01-15 Published : 2010-06-22

Keywords: Earnings Quality, relevance, Reliability, Conceptual Frameworks,

Abstract :

AbstractIn this study, the qualitative characteristics of financial reporting were used for evaluating earningquality. We examined 91 firms accepted in Tehran stock Exchange 1999-2007 periods. Accordingconceptual frame works in Iran, the primary determinants of accounting information quality arerelevance and reliability, and these two dimensions make accounting information useful decisionmaking. In this study we develop a measure of earning quality that encompasses various componentsof both dimensions of earnings quality, reliability and relevance.Then, the firms with factor analysis, was classified, and firms with high and low earning quality wassegregated. Finally, ohlson’s price- earning regression for test hypotheses was applied.The results show that earning response coefficient and explanatory power of earnings are notsignificantly higher in portfolios of firms with high quality earnings compared to firms with lowquality earnings. The result shows that users, in general, prefer the reliability to the relevancedimension. Finally we show that the earnings quality does not reflect decision usefulness to users.