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Business strategy, earnings properties, and earnings quality

Author

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  • Karampinis, Nikolaos
  • Vlismas, Orestes
  • Ballas, Apostolos

Abstract

This study explores the relationship between business strategy and earnings properties, which are frequently considered as proxies of earnings quality. Specifically, we examine the implications of different strategic positionings for earnings properties that are related to earnings management, conditional conservatism, earnings persistence, and earnings smoothness. Using an international sample, our empirical results indicate that business strategy is inherently linked to these earnings properties. Firms that focus on a business strategy of continuous innovation have larger discretionary accruals, more persistent earnings, and lower earnings smoothness relative to firms that focus on a business strategy of operation efficiency. We also find some evidence for differences in conditional conservatism, although the associations are weaker and sensitive to sample composition. Our main inference is that business strategy inherently affects earnings properties.

Suggested Citation

  • Karampinis, Nikolaos & Vlismas, Orestes & Ballas, Apostolos, 2024. "Business strategy, earnings properties, and earnings quality," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:jiaata:v:56:y:2024:i:c:s1061951824000387
    DOI: 10.1016/j.intaccaudtax.2024.100632
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    More about this item

    Keywords

    Business Strategy; Earnings Management; Conditional Conservatism; Earnings Persistence; Earnings Smoothness; Earnings Quality;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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