• Register
  • Login
  • Persian

Financial Accounting Knowledge

  1. Home
  2. A model for identification of accounting quality

Current Issue

By Issue

By Author

By Subject

Author Index

Keyword Index

About Journal

Aims and Scope

Editorial Board

Publication Ethics

Indexing and Abstracting

Related Links

FAQ

Peer Review Process

Journal Metrics

News

Guide for Authors

Terms and Conditions

Forms

A model for identification of accounting quality

    Author

    • Arash Ghorbani

    Assistant professor, Department of Accounting, Bojnourd Branch, Islamic Azad University, Iran

,

Document Type : Research Paper

10.30479/jfak.2020.11137.2501
  • Article Information
  • References
  • Download
  • How to cite
  • Statistics
  • Share

Abstract

Purpose: The main purpose of this study is to develop and measure the notion of accounting quality, which is defined here as the degree accounting accruals contribute to the accurate measurement of the firm’s economic performance.
Method:The research proposes a set of moment conditions to disentangle the three distinct variance components: the variance of true performance, the variance of performance measurement component in accruals and the variance of accounting error. The GMM estimation has been used to solve the moment conditions and estimate the variance components. The research employs a sample of annual data of 180 firms listed in Tehran Security Exchange spanning the year 2004-2017. 
Results:The research findings show that, on average, the standard deviation of performance component in accruals exceeds the standard deviation of accounting error.
Conclusion: The result overall implies that, on average, the benefits of using accounting accruals exceed its costs. This is consistent with the role of auditing in reducing the noise of accounting earnings and the current demand for accounting accrual process.
Contribution:The study proposes a new and flexible method for capturing and identifying the notion of accounting quality.
 

Keywords

  • Accruals
  • Accounting Quality
  • Accounting Error
  • Moment Conditions
  • True Performance
  • XML
  • PDF 1.18 M
  • RIS
  • EndNote
  • Mendeley
  • BibTeX
  • APA
  • MLA
  • HARVARD
  • CHICAGO
  • VANCOUVER
References
References
1. Allen, E. J., Larson, C. R., & Sloan, R. G. (2013), Accrual reversals, earnings and stock returns, Journal of Accounting and Economics, 56(1): 113-129.
2. Baber, W. R., Kang, S. H., & Li, Y. (2011), Modeling discretionary accrual reversal and the balance sheet as an earnings management constraint, The Accounting Review, 86(4): 1189-1212.
3. Ball, R., & Brown, P. (1968), An empirical evaluation of accounting income numbers, Journal of accounting research: 159-178.
4. Banker, R., Fang, S., & Jin, B. (2015), Asymmetric behavior of accruals, Temple University: Working paper.
5. Beyer, A., Guttman, I., & Marinovic, I. (2018), Earnings management and earnings quality: Theory and evidence, The Accounting Review. https://doi.org/10.2308/accr-52282
6. Bloomfield, M., Gerakos, J., & Kovrijnykh, A., (2017), Accrual reversals and cash conversion, working paper.
7. Brooks, R., (1996), Changes in asymmetric information at earnings and dividendannouncements, Journal of Business Finance & Accounting 23, 359-379.
8. Dastgir, M., Khodadadi, V., & Rastegar, M., (2009), The relation between financial and non financial charectristcs with accrual/earnings quality, Journal of security exchange, 3(10), 55-75. (In Persian)
9. Dechow, P. M., (1994), Accounting earnings and cash flows as measures of firm performance: The role of accounting accruals. Journal of accounting and economics, 18(1): 3-42.
10. Dechow, P. M., & Dichev, I. D., (2002), The quality of accruals and earnings: The role of accrual estimation errors. The accounting review, 77(s-1): 35-59.
11. Dechow, P., Ge, W., & Schrand, C., (2010), Understanding earnings quality: A review of the proxies, their determinants and their consequences, Journal of accounting and economics, 50(2-3): 344-401.
12. Easton, P. D., Harris, T. S., & Ohlson, J. A., (1992), Aggregate accounting earnings can explain most of security returns: The case of long return intervals. Journal of Accounting and Economics, 15(2-3): 119-142.
13. Ghaemi, M. H., Livani, A. J., and Deh Bozorgi, S., (2008), Earnings Quality and Stock Returns. Accounting and Auditing Review, 15(3): 71-88. (In Persian)
14. Healy, P. M., (1985), The effect of bonus schemes on accounting decisions, Journal of accounting and economics, 7(1-3): 85-107.
15. Hribar, P., & Craig Nichols, D., (2007), The use of unsigned earnings quality measures in tests of earnings management, Journal of Accounting Research, 45(5): 1017-1053.
16. Holthausen, R. W., (1990), Accounting method choice: Opportunistic behavior, efficient contracting, and information perspectives. Journal of accounting and economics, 12(1-3): 207-218.
17. Jones, J., (1991), Earnings management during import relief investigations, Journal of Accounting Research 29: 193–228.
18. Khajavi, Sh., and Nazemi, A., (2005), The relation between earnings quality and stock return with focus on accruals’ role: evidence from Iran, Accounting and Auditing Review, 12(2): 37-60. (In Persian)
19. Khosh Tinat, M., and Esameili, Sh., (2005), The association between earnings quality and return, Journal of accounting studies, 12(3): 27-56. (In Persian) 
20. McNichols, M. F., (2002), Discussion of the quality of accruals and earnings: The role of accrual estimation errors, The Accounting Review, 77: 61−69.
21. McNichols, M. F., (2000), Research design issues in earnings management studies, Journal ofAccounting and Public Policy 19 (4-5): 313–45.
22. Nikolaev, V., (2018), Identifying accounting quality, Chicago Booth Research Paper, http://dx.doi.org/10.2139/ssrn.2484958.
23. Noravesh, I., Nazemi, A., and Heidari, M., (2006), Accruals quality and earnings: the role of estmation error in accruals, Accounting and Auditing Review. 13(1): 135-160. (In Persian)
24. Rayburn, J., (1986), The association of operating cash flow and accruals with security returns, Journal of Accounting Research: 112-133.
25. Richardson, S. A., Sloan, R. G., Soliman, M. T., & Tuna, I., (2005), Accrual reliability, earnings persistence and stock prices, Journal of accounting and economics, 39(3): 437-485.
26. Subramanyam, K. R., (1996), The pricing of discretionary accruals. Journal of accounting and economics, 22(1-3): 249-281.
27. Wysocki, P., (2009), Assessing earnings and accruals quality: US and international evidence, Unpublished working paper, Cambridge: MIT Sloan School of Management.
28. Watts, R. L., & Zimmerman, J. L., (1986), Positive accounting theory,Prentice Hall, Englewood Cliffs, NJ
    • Article View: 1,473
    • PDF Download: 1,291
Financial Accounting Knowledge
Volume 7, Issue 1 - Serial Number 24
May 2020
Pages 75-100
Files
  • XML
  • PDF 1.18 M
Share
How to cite
  • RIS
  • EndNote
  • Mendeley
  • BibTeX
  • APA
  • MLA
  • HARVARD
  • CHICAGO
  • VANCOUVER
Statistics
  • Article View: 1,473
  • PDF Download: 1,291

APA

Ghorbani, A. (2020). A model for identification of accounting quality. Financial Accounting Knowledge, 7(1), 75-100. doi: 10.30479/jfak.2020.11137.2501

MLA

Ghorbani, A. . "A model for identification of accounting quality", Financial Accounting Knowledge, 7, 1, 2020, 75-100. doi: 10.30479/jfak.2020.11137.2501

HARVARD

Ghorbani, A. (2020). 'A model for identification of accounting quality', Financial Accounting Knowledge, 7(1), pp. 75-100. doi: 10.30479/jfak.2020.11137.2501

CHICAGO

A. Ghorbani, "A model for identification of accounting quality," Financial Accounting Knowledge, 7 1 (2020): 75-100, doi: 10.30479/jfak.2020.11137.2501

VANCOUVER

Ghorbani, A. A model for identification of accounting quality. Financial Accounting Knowledge, 2020; 7(1): 75-100. doi: 10.30479/jfak.2020.11137.2501

  • Home
  • About Journal
  • Editorial Board
  • Submit Manuscript
  • Contact Us
  • Sitemap

News

Financial Accounting Knowledge, is licensed under a Creative Commons Attribution 4.0 International License (CC BY NC) .

 

Newsletter Subscription

Subscribe to the journal newsletter and receive the latest news and updates

© Journal Management System. Powered by Sinaweb