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Line-Item Analysis of Earnings Quality

Author

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  • Melumad, Nahum D.
  • Nissim, Doron

Abstract

In this paper, we discuss earnings quality and the related concept of earnings management, focusing on the primary financial accounts. For each key line-item from the financial statements, we summarize accounting and economic considerations applicable to that item, discuss implications for earnings quality, evaluate the susceptibility of the item to manipulation, and identify potential red flags. The red flags and specific issues discussed for the individual line-items provide a framework for fundamental and contextual analysis by academic researchers and practitioners.

Suggested Citation

  • Melumad, Nahum D. & Nissim, Doron, 2009. "Line-Item Analysis of Earnings Quality," Foundations and Trends(R) in Accounting, now publishers, vol. 3(2–3), pages 87-221, April.
    • Handle: RePEc:now:fntacc:1400000010
    DOI: 10.1561/1400000010
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    Citations

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    Cited by:

    1. Bauman, Mark P., 2013. "The adequacy of fixed asset disclosures under U.S. GAAP," Research in Accounting Regulation, Elsevier, vol. 25(2), pages 149-156.
    2. Dichev, Ilia D. & Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2013. "Earnings quality: Evidence from the field," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 1-33.
    3. Rafa³ Cieslik, 2016. "Effect of Earnings Quality on the Returns-Earnings Relationship: Evidence from the Warsaw Stock Exchange (Wplyw jakosci zysku na zaleznosc pomiedzy zyskiem a stopa zwrotu z akcji na przykladzie GPW w ," Research Reports, University of Warsaw, Faculty of Management, vol. 2(22), pages 60-77.
    4. Sabur Mollah & Omar Farooque & Asma Mobarek & Philip Molyneux, 2019. "Bank Corporate Governance and Future Earnings Predictability," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(3), pages 369-394, December.

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