Earnings Management and Earnings Quality in Emerging Financial Markets: A Theoretical Discourse
Journal Title: Muhasebe ve Finansman Dergisi - Year 2019, Vol 21, Issue 84
Abstract
Net cash flows generated from a firm’s operations periodically is statement enough of its financial performance. Though net cash flows and earnings are and ought to be identical, in practice they are not. This gap inversely reflects on earnings quality. Earnings are created through accounting efforts while cash flows are real. Through earnings management boards have discretion accorded by accounting standards to determine what and how to report. The paper deliberates on interactions between earnings management and quality motivations thereof. By considering attendant theories of proprietary; agency and political costs we lay a theoretical basis for such interactions hence laying a foundation for empirical analysis on the subject in emerging markets. Two fundamental issues in corporate financial management: financial reporting and firm asset valuation depicted as changes in prices of stocks is addressed. A nexus between accounting and finance practice and the transmission of information derived from these interactions to investors is clarified.
Authors and Affiliations
Muchina STEPHEN
Keywords
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- EP ID EP649434
- DOI 10.25095/mufad.625865
- Views 92
- Downloads 0
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