Capital Market Implications of Earnings Quality

Capital Market Implications of Earnings Quality

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In his speech from 1998 the former chairman of the United States Securities and Exchange Commission (SEC) Arthur Levitt pointed out that trust qis the bedrock of our capital marketsq and that this must not be shaken by the erosion of earnings quality. He made clear that it is the challenge of the whole financial community to counteract such a development. This thesis deals with the question whether the importance of earnings for the capital market varies with its quality. The question arises, because in recent years a large number of firm scandals has shaken the trust in the reliability of reported earnings. In order to properly address the research questions, the literature on earnings quality definitions, quality measures as well as implications of earnings quality on capital markets is reviewed and critically discussed. The author investigates whether well known results concerning capital market implications of earnings quality remain stable for all measures considered. She answers the question of how earnings quality affects firm value, cost of equity capital, and the accuracy of analysts' forecasts taking into account the effects of determinants of earnings quality.... Auditor/Auditora#39;s Opinion auop Time Trend Trend =Observation Year - first year of dataset #=Compustat data item number (if available), MV=Market Value of Equity, P=Stock Price, and CSHO=Common Shares Outstanding. Market data usedanbsp;...


Title:Capital Market Implications of Earnings Quality
Author: Bianca Ahrens
Publisher:BoD – Books on Demand - 2010
ISBN-13:

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