IDEAS home Printed from https://ideas.repec.org/h/zbw/eschap/323848.html
   My bibliography  Save this book chapter

Earnings Quality in the Microfinance Industry

In: Microfinance in Developing Countries: Issues, Policies and Performance Evaluation

Author

Listed:
  • Beisland, Leif Atle
  • Mersland, Roy

Abstract

This study investigates the popular claim that reported earnings are invalid as a performance measure of microfinance institutions. Using earnings quality metrics from the accounting literature, we are unable to document lower earnings quality for microfinance institutions than for listed corporations. Moreover, we find that the proposed alternative in the microfinance industry to reported earnings, adjusted earnings, do generally not score higher on earnings quality metrics than do reported earnings. This first study of earnings quality in the microfinance industry suggests that reported earnings are a relevant measure of the current and future financial performance of microfinance institutions.

Suggested Citation

  • Beisland, Leif Atle & Mersland, Roy, 2013. "Earnings Quality in the Microfinance Industry," EconStor Open Access Book Chapters, in: Microfinance in Developing Countries: Issues, Policies and Performance Evaluation, pages 83-106, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:eschap:323848
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/323848/1/Earnings-Quality-in-the-Microfinance-Industry.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Schreiner, 2002. "Aspects of outreach: a framework for discussion of the social benefits of microfinance," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 591-603.
    2. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 46(3), pages 467-498, June.
    3. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    4. Leif Atle Beisland, 2011. "The predictive ability and value relevance of accounting measures," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 2(3), pages 215-241.
    5. Lang, Mark & Smith Raedy, Jana & Wilson, Wendy, 2006. "Earnings management and cross listing: Are reconciled earnings comparable to US earnings?," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 255-283, October.
    6. Dechow, Patricia M., 1994. "Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals," Journal of Accounting and Economics, Elsevier, vol. 18(1), pages 3-42, July.
    7. Aaron Crabtree & John Maher, 2005. "Earnings Predictability, Bond Ratings, and Bond Yields," Review of Quantitative Finance and Accounting, Springer, vol. 25(3), pages 233-253, November.
    8. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    9. Dichev, Ilia D. & Tang, Vicki Wei, 2009. "Earnings volatility and earnings predictability," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 160-181, March.
    10. Patricia M. Dechow & Weili Ge, 2006. "The persistence of earnings and cash flows and the role of special items: Implications for the accrual anomaly," Review of Accounting Studies, Springer, vol. 11(2), pages 253-296, September.
    11. Stuart Michelson & James Jordan-Wagner & Charles Wootton, 2000. "The relationship between the smoothing of reported income and risk-adjusted returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(2), pages 141-159, June.
    12. Yaron, J., 1992. "Assessing Development Finance Institutions; A Public Interest Analysis," World Bank - Discussion Papers 174, World Bank.
    13. Jennifer Francis & Michael Smith, 2005. "A Reexamination of the Persistence of Accruals and Cash Flows," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 43(3), pages 413-451, June.
    14. Nelson, Karen K. & Barth, Mary E. & Cram, Donald, 2001. "Accruals and the Prediction of Future Cash Flows," Research Papers 1594r, Stanford University, Graduate School of Business.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daudi Pascal & Leif Atle Beisland & Roy Mersland, 2016. "The origin of CEOs and its influence on microfinance performance and risk-taking," Working Papers CEB 16-046, ULB -- Universite Libre de Bruxelles.
    2. Mersland, Roy & Strøm, R. Øystein, 2014. "Measuring Microfinance Performance," EconStor Open Access Book Chapters, in: Microfinance Institutions: Financial and Social Performance, pages 12-30, ZBW - Leibniz Information Centre for Economics.
    3. Beisland, Leif Atle & Mersland, Roy & Randøy, Trond, 2014. "Transparency and Disclosure in the Global Microfinance Industry: Implications for practice and policy makers," EconStor Open Access Book Chapters, in: The Oxford Handbook of Political, Institutional and Corporate Transparency, pages 434-455, ZBW - Leibniz Information Centre for Economics.
    4. Beisland, Leif Atle & Mersland, Roy & Randøy, Trond, 2014. "Microbank Regulation and Earnings Quality: A Global Survey," EconStor Open Access Book Chapters, in: Microfinance Institutions: Financial and Social Performance, pages 271-293, ZBW - Leibniz Information Centre for Economics.
    5. Beisland, Leif Atle & Mersland, Roy, 2014. "Earnings Quality in Nonprofit Versus For-Profit Organizations: Evidence From the Microfinance Industry," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 43(4), pages 652-671.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beisland, Leif Atle & Mersland, Roy, 2014. "Earnings Quality in Nonprofit Versus For-Profit Organizations: Evidence From the Microfinance Industry," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 43(4), pages 652-671.
    2. Macías, Marta & Muiño, Flora, 2011. "Examining dual accounting systems in Europe," The International Journal of Accounting, Elsevier, vol. 46(1), pages 51-78, March.
    3. Alina Beattrice Vladu & Barcelona Spain, 2013. "Smoothing Behavior Of Firms In Times Of Crisis: Empirical Evidence From The Spanish Economic Environment," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 1-13.
    4. Goncharov, Igor & Werner, Joerg R. & Zimmermann, Jochen, 2009. "Legislative demands and economic realities: Company and group accounts compared," The International Journal of Accounting, Elsevier, vol. 44(4), pages 334-362, December.
    5. Silhan, Peter A., 2014. "Income smoothing from a Census X-12 perspective," Advances in accounting, Elsevier, vol. 30(1), pages 106-115.
    6. Troy Pollard, 2016. "Sneaking in the back door? An evaluation of reverse mergers and IPOs," Review of Quantitative Finance and Accounting, Springer, vol. 47(2), pages 305-341, August.
    7. Bård Misund, 2016. "Vertical integration and value-relevance: Empirical evidence from oil and gas producers," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1264107-126, December.
    8. 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.
    9. repec:mth:ijafr8:v:9:y:2019:i:1:p:89-121 is not listed on IDEAS
    10. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    11. Eddie Chamisa & Musa Mangena & Hamutyinei Harvey Pamburai & Venancio Tauringana, 2018. "Financial reporting in hyperinflationary economies and the value relevance of accounting amounts: hard evidence from Zimbabwe," Review of Accounting Studies, Springer, vol. 23(4), pages 1241-1273, December.
    12. Elmar R. Venter & David Emanuel & Steven F. Cahan, 2014. "The Value Relevance of Mandatory Non-GAAP Earnings," Abacus, Accounting Foundation, University of Sydney, vol. 50(1), pages 1-24, March.
    13. Leif Atle Beisland & Roy Mersland & Trond Randøy, 2014. "Microbank Regulation and Earnings Quality: A Global Survey," Palgrave Studies in Impact Finance, in: Roy Mersland & R. Øystein Strøm (ed.), Microfinance Institutions, chapter 14, pages 271-293, Palgrave Macmillan.
    14. Jincheol Bae & Jaehong Lee & Eunsoo Kim, 2019. "Does Fixed Asset Revaluation Build Trust between Management and Investors?," Sustainability, MDPI, vol. 11(13), pages 1-22, July.
    15. Hao, Qian & Shi, Xiangyan & Bu, Danlu, 2018. "The Chinese stimulus program from 2008 to 2010 and accounting information quality," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 33(C), pages 64-78.
    16. Richard Kent & Jacqueline Birt, 2021. "IAS 7 and value relevance: the direct method versus the indirect method," Review of Accounting Studies, Springer, vol. 26(4), pages 1532-1586, December.
    17. Nezlobin, Alexander & Sloan, Richard G. & Giedt, Jenny Zha, 2022. "Construct validity in accruals quality research," LSE Research Online Documents on Economics 112165, London School of Economics and Political Science, LSE Library.
    18. Karampinis, Nikolaos I. & Hevas, Dimosthenis L., 2011. "Mandating IFRS in an Unfavorable Environment: The Greek Experience," The International Journal of Accounting, Elsevier, vol. 46(3), pages 304-332, September.
    19. Kamarudin, Khairul Anuar & Ariff, Akmalia M. & Jaafar, Aziz, 2020. "Investor protection, cross-listing and accounting quality," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    20. Iain Clacher & Alan Duboisée Ricquebourg & Allan Hodgson, 2013. "The Value Relevance of Direct Cash Flows under International Financial Reporting Standards," Abacus, Accounting Foundation, University of Sydney, vol. 49(3), pages 367-395, September.
    21. Abdulrahman Alomair & Alan Farley & Helen Hong Yang, 2022. "The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2839-2878, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:eschap:323848. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.