The relationship between earnings quality and performance features

Subject Areas :

فروغ Rostamiyan ¹ , محمد KHodaei ² , مجتبی Hedar ³

1 - استادیار دانشگاه آزاد اسلامی واحد تهران شمال
2 - استادیار دانشگاه آزاد اسلامی واحد تهران شمال
3 - کارشناس ارشد حسابداری دانشگاه آزاد اسلامی واحد تهران شمال

Received: 2015-05-09 Accepted : 2015-05-09 Published : 2012-02-20

Keywords:

Abstract :

The conflict of interest between issuers of financial statements and the users of financial statements have been the subject of significant debate for using different methods of accounting accepted principles and implementing earning as an important criterion for decision making process. Thus, this controversial results, made us to contribute to this debate by investigating the relationship between earnings quality attributes and performance of Iranian public listed firms in Tehran stock exchange. We examined sample of 63 firms that randomly ed in the period 2002 to 2009. We derived a summary measure of earnings quality by applying factor analysis on two variables representing different components of two primary dimensions of earnings quality: Feedback value (FV) and Predictive Value (PV). Also two common financial performance measures namely Returns on Assets (ROA) and Tobin's Q were examined. We then provide empirical evidence to address the question, whether earnings quality of Iranian listed firms is associated with their performance or not. Based on using pool regression, we interpret our results that, the feedback value of earnings has both positive and significant association with firm performance measures. On the other hand, predictive value has both negative and significant association with returns on assets and has not significant association with Tobin's Q. further, the current study provide novel evidence towards the understanding of more powerful association between feedback value with firm performance measures than predictive value. Specifically in this survey, we controlled the influence of essential firm characteristics namely size, leverage, and growth on firm performance.

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 (FV), Predictive Value (PV), Tobin's Q.