The Effect of Global Financial Crisis on Earnings Quality

Document Type : Research Paper

Authors

1 Assistant Professor of Accounting, Shahid Beheshti University, Tehran, Iran.

2 M.A. of Accounting, Shahid Beheshti University, Tehran, Iran.

Abstract

In the global financial crisis, managers are under pressure, and to avoid bankruptcy, they manipulate financial information or hide them to postpone financial distress, using their authorities in applying accounting standards and doing estimates and forecasts. This study investigates one of the most important factors affecting earnings quality, using seven criteria to measure earnings quality, including ex-post and ex-ante conservatism, value relevance, accruals quality, earnings persistence and earnings smoothing, as well as a zero-one dummy variable to introduce the absence or presence of global financial crisis, totally in the multivariate regression and panel data models. This study used data collected from a sample of 148 firms in the Tehran Stock Exchange in the years 2005 to 2015.
Findings showed that the global financial crisis improves quality of earnings through positive impacts on some criteria of earnings quality, including earnings persistence and smoothing, and reduces quality of earnings through negative impacts on some other criteria, including conservatism, value relevance, accruals quality and earnings predictability. The findings also indicated that quality of earnings before the period of global financial crisis is more than that during the crisis.

Keywords

References

Ebrahimi, S.K., Jalali, F. (2014). Investigating relationship between degree of financial crisis and relevance of the components of accounting profit. The First Management and Accounting Conference with Value-Creating Approach. [In Persian].
Islami Bidgoli, G.R., Nikumaram, H. (2011). Accounting conservatism and financial crisis: Evidence from Iran. Journal of Financial Knowledge of Securities, 4(9), 125-146 [In Persian].
Jafarimehr, E. (2009). Impact of global financial crisis on the Iranian economy. Journal of Economic Reports, 18(206), 40-41 [In Persian].
Kamyabi, Y., Malekian, E. (2012). Investigating effect of global financial crisis on liquidity ratios: Evidence from Iran, M.A. Thesis, Mazandran University [In Persian].
Safarzadeh, M.H. (2013). Earning quality and its measurement criteria. Journal of Accounting Research, 3(1), 125-145 [In Persian].
Sepasi, S., Hassanzadeh, M. (2016). Impact of corporate social responsibility on the economic stability. Journal of Value and Behavioural Accounting, 1(1), 123-138 [In Persian].
Vali Pour, H., Talebnia, G.A. (2014). Effect of profit management on earnings quality of companies with financial crisis. Journal of Accounting Knowledge, 4(13), 75-150 [In Persian].
Journal of Accounting Knowledge
Volume 8, Issue 4 - Serial Number 31
February 2018
Pages 37-64

Files

History

  • Receive Date: 24 May 2017
  • Revise Date: 27 September 2017
  • Accept Date: 10 October 2017

Share

How to cite

Statistics