Earnings Quality Attributes and Investment Opportunities for Latin American Firms

Abstract

This work verifies if companies with better accounting information show better performance and investigates the impact of better accounting information on the financial constraints. This study is based on an unbalanced panel data of 596 firms from seven Latin American countries between 1989 and 2009. The return on equity (ROE) and Market to book (MB) variables are used to define the firms' performance, which are regressed against five models that consider the quality of accounting information. We also investigate the relationship between financial constraint, measured by the KZ index, and accounting quality. The results support the view that earnings quality is an important factor to explain market and operational performance and aspects related to efficiency are important to determine the operational performance, but are not significant when market performance of Latin American firms are analyzed. When we model the firm's investment, the quality of accounting information appears to be a useful proxy to financial constraint. Moreover, the accounting quality plays a positive effect on investment that is a much more positive for unconstraint firms.

Audit Quality and Earnings Management: Evidence from Sri Lanka: Food & Beverage and Hotel Sectors

“…Moreover, Sri Lanka is a country that mostly relies on tourism, and the selected sectors are more crucial to the development of Sri Lanka, which creates knowledge for the decision-makers at large. Accordance with prior studies (Shabeeb Ali et al, 2020;Carvalho et al, 2017;Habbash, 2012;Wijesinghe & Kehelwalathenna, 2017) we excluded the Banks, finance and insurance sector companies due to the peculiar nature of the sector. Also, we disregarded the diversified sector from our analysis due to the nonavailability of data due to the nature of the variable that we used in our study.…”

“…Stakeholders, especially investors, lenders, and managers, access information regarding companies through financial statements (Carvalho et al, 2017;Amr et al, 2019;Mayer, 2007). The International Accounting Standard Board (IASB) also recognised the importance of financial statements for investors' economic decisions.…”

Persistence and Predictive Ability of Earnings: Evidence from France and the UK

“…Kordestani et al (2016) proved that the timely loss recognition did not affect the persistence and the predictive ability of earnings in Iranian listed companies during the period of 2003-2010, which implied that accounting conservatism did not distort earnings quality. Carvalho, Camargo and Kalatzis (2017) suggested that earnings quality attributes, including earnings predictive ability, were good explicators of operational and market performance of Latin American companies over the period of 1989-2009. Kundu and Banerjee (2021) suggested that Indian listed companies that reported better earnings in terms of predictive ability generated higher stock returns.…”

Book-Tax Differences Anormais, Suavização Dos Resultados E Real Earnings Management Em Empresas De Capital Aberto Listadas No Brasil

“…Earnings Quality, ou qualidade dos resultados contábeis (ou dos lucros), é um conceito que envolve indicadores que refletem o desempenho financeiro e informacional, atual e futuro, de determinada entidade, a partir de dados relevantes para a tomada de decisão, os quais são mensurados pela Contabilidade em um contexto específico (Carvalho, Camargo, & Kalatzis, 2017;Dechow et al, 2010). As medidas de qualidade dos lucros são estimadas a partir de relatórios anuais ou trimestrais, não sendo aplicadas em intervalos curtos, o que permite uma análise comparativa de dados recentes e anteriores (Ecker, Francis, Kim, Olsson, & Schipper, 2008).…”

“…Em suma, pode-se concluir que Earnings Quality é uma medida que possibilita a análise do desempenho operacional e de mercado de uma determinada entidade, o que implica diretamente no âmbito dos investimentos (Carvalho et al, 2017). Contudo, são várias as medidas que são utilizadas para mensuração da qualidade dos resultados, o que pode depender do momento, do cenário e das necessidades empresariais.…”