Earnings Quality and Information Transfers
Journal
當代會計
Journal Volume
19
Journal Issue
1
Pages
1-39
Date Issued
2018
Author(s)
Abstract
This study examines whether the earnings quality of a firm that first announces quarterly earnings in its industry affects the magnitude of intra-industry information transfers. Prior research indicates that higher quality earnings present a better reflection of the operating fundamentals of a firm. In this paper, I argue that because earnings of high quality contain better information about a firm's performance, they are more helpful to investors when investors value non-announcing firms (firms which make earnings announcements after the first announcer)in the same industry, which results in greater information transfer. The results are consistent with my hypothesis in cases where earnings quality is captured using market-based measures (ERC and value-relevance); however, they are inconsistent with our hypothesis in cases where it is captured using accrual-based measures (abnormal discretionary accruals and accrual quality). This conclusion is consistent with the notion that investors differ in their incorporation of market-based and accrual-based earnings quality in earnings expectations.
Type
journal article