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Earnings Quality in the Microfinance Industry

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

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  • 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
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