Subscribe to our Newsletter and get informed about new publication regulary and special discounts for subscribers!

ILSHS > ILSHS Volume 11 > An Investigation on the Earnings Quality in...
< Back to Volume

An Investigation on the Earnings Quality in Companies (Evidence from Iran)

Full Text PDF


A considerable focus of bottom-line income losses is important in the case of investigating quality of earnings. The future of stock returns is all associated with accruements that are in relation with reliability, and negativity. Earning increases that are accompanied by high accruals, suggesting inferiority of earnings, are related with poor future returns. This study describes the investigation of different hypotheses earnings manipulation, extrapolative fundaments about future growth, and under reaction to changes in business conditions to explain accruals’ predictive power. Differentiations between the hypotheses are grounds on operating performance, the behavior of individual accrual items, discretionary versus fixed investment trust components of accruals, and special items. In the main hypothesis we tested stock return and Earning Quality separately. In this investigation firms in according to a mount of accruals. Later on the validity using within-industry comparisons, and data on Tehran stocks was checked. This means that earnings management occurs with a time lag by market participants. In this research it was indicated that components of accruals including changes in accounts receivable, inventory, other current assets, current liabilities and other current liabilities have not significant effect on stock return. It was also indicated that for discretionary accruals, decreasing of stock return is greater than the decreasing of stock return for non-discretionary accruals.


International Letters of Social and Humanistic Sciences (Volume 11)
B. Meihami et al., "An Investigation on the Earnings Quality in Companies (Evidence from Iran)", International Letters of Social and Humanistic Sciences, Vol. 11, pp. 91-99, 2013
Online since:
September 2013

Brown L., Sivakumar K., Comparing the quality of three earnings. Working Paper, Georgia State University, (2001).

Collins D., Kothari S. P., Journal of accounting and economics 11 (1989) 143-181.

Cornell B., Landsman R., Financial analysts journal 59 (2003) 20-29.

DeAngelo L., The accounting review 61 (1986) 400-420.

Dichow P., Dichev I., The accounting review 77 (2002) 35-59.

Financial Accounting Standards Board, Statement of financial accounting concept 1, Stamford, CT., (1983).

Hand J., The accounting review 64 (1989) 587-623.

Khajavi P., Nazemi A., Accounting and Auditing 40 (2005) 37-60.

Lougee B., C. Marquardt C., Account. Rev. 79(3) (2004) 769-795.

Mohammad Hadi Zohdi, Hashem Valipour, Mohadese Hasani, Mohammad Reza Dalvand, Maryam Zohdi, Research Journal of Applied Sciences, Engineering and Technology 4(16) (2012) 2632-2638.

Warfield T. Wild J., Accounting Review 67 (1992) 821-842. ( Received 06 September 2013; accepted 10 September 2013 ).

Show More Hide
Cited By:
This article has no citations.