Earnings Quality Definitions, Measures, and Financial Reporting
This book provides an overview of earnings quality (EQ) in the context of financial reporting and offers suggestions for defining and measuring it. Although EQ has received increasing attention from investors, creditors, regulators, and researchers in dif
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Definitions, Measures, and Financial Reporting
Earnings Quality
Elisa Menicucci
Earnings Quality Definitions, Measures, and Financial Reporting
Elisa Menicucci University of Roma Tre Rome, Italy
ISBN 978-3-030-36797-8 ISBN 978-3-030-36798-5 (eBook) https://doi.org/10.1007/978-3-030-36798-5 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Melisa Hasan This Palgrave Pivot imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Preface
In recent years, earnings quality (EQ) has received more and more attention from investors, creditors, regulators, and researchers in different areas. Financial statements are the main source of information for stakeholders, and especially, income represents the most important accounting information that managers, directors, investors, and other stakeholders rely on for their decisions. In this regard, one issue is whether accounting information copes satisfactorily with such a wide variety of information needs. Since earnings are assumed as the basis for most of decisions, assessment models, and stock pricing, the income statement needs to be of high quality to assure reliability, accuracy, and informativeness of accounting information. However, the amount of earnings cannot be always a good criterion for investors’ decision-making since sometimes earnings are manipulated by management. Hence, users of financial reporting have to note both the quantity and the quality of earnings. In this context, researchers have proposed different definitions of EQ since it is a multi-dimensional and broad concept encompassing many determinants. Moreover, there is not a generally
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