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Why have measures of earnings quality changed over time?

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  • Srivastava, Anup

Abstract

The properties of earnings have changed dramatically over the past 40 years. Prior studies interpret this trend as a decline in earnings quality but disagree on whether it results from changes in the real economy or changes in accounting standards. I find that each new cohort of listed firms exhibits lower earnings quality than its predecessors, mainly because of higher intangible intensity. I conclude that the trend of decline in earnings quality is due more to changes in the sample of firms than to changes in generally accepted accounting principles (GAAP) or in the earnings quality of previously listed firms.

Suggested Citation

  • Srivastava, Anup, 2014. "Why have measures of earnings quality changed over time?," Journal of Accounting and Economics, Elsevier, vol. 57(2), pages 196-217.
    • Handle: RePEc:eee:jaecon:v:57:y:2014:i:2:p:196-217
    DOI: 10.1016/j.jacceco.2014.04.001
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    Keywords

    Knowledge industries; Intangible capital; Core expenses; Accounting standards; Earnings quality;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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