Earnings quality as a predictor of firm performance: empirical analysis in the USA

Authors

• Adel Almasarwah, Georgia College & State University
• Ahmed Al-Omush, American University in the Emirates
• Yahya Marei, Seneca College of Applied Arts & Technology
• Humoud Almutairi, International University of Science and Technology in Kuwait (IUK)

Document Type

Article

Publication Date

1-1-2025

Publication Title

International Journal of Managerial and Financial Accounting

Abstract

This study explores the link between firm performance and earnings quality in the USA, employing real earnings management (REM) and accruals earnings management (AEM) models. Through panel data robust regression analysis, we assess firm performance proxies, including return on assets, return on equity, operating cash flow, cash ratio, current ratio, and receivable accruals. Results highlight the significant impact of measures such as return on assets, return on equity, operating cash flow, cash ratio, current ratio, receivables accruals ratio, leverage, and firm industry on earnings quality. Notably, increasing liquidity and higher debt positively influence earnings quality, particularly in low-interest-rate environments. However, qualitative insights are essential for a comprehensive understanding of firm performance. Varied firm performance metrics exhibit distinct impacts on earnings quality, with return on assets and return on equity having the most significant effect. This research, integrating real and accrual earnings management, contributes original insights into corporate earnings management and firm performance in the USA context.

Volume Number

17

Issue Number

2

First Page

159

Last Page

174

DOI

10.1504/IJMFA.2025.145288

Recommended Citation

Almasarwah, Adel; Al-Omush, Ahmed; Marei, Yahya; and Almutairi, Humoud, "Earnings quality as a predictor of firm performance: empirical analysis in the USA" (2025). Faculty and Staff Works. 968.
https://kb.gcsu.edu/fac-staff/968