Earnings quality and stress levels of Chinese listed companies

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper investigates the relation between earnings quality and stress levels of Chinese companies listed in Shanghai and Shenzhen stock exchanges from 2003 to 2007 by classifying them as financially stressed and bankrupt (SB), financially stressed and not bankrupt (SNB), and not financially stressed and not bankrupt (NSNB) firms. We measure the earnings quality by four separate attributes: accruals quality, earnings persistence, earnings predictability, and earnings smoothness. We find that earnings quality levels are parallel to firm’s stress levels: the SB firms have the lowest earnings quality measured by each of the four earnings attributes, the SNB firms have a lower earnings quality compared with the SB firms, the NSNB firms have the highest earnings quality. We also find that the earnings quality deteriorated over the study period, the number of SB firms with the lowest earnings quality increased, and the number of NSNB firms with the highest earnings quality decreased for the fiscal years 2003 to 2007.
Original languageEnglish
Pages (from-to)109-116
Number of pages8
JournalAcademy of Taiwan Business Management Review
Volume9
Issue number1
Publication statusPublished - Apr 2013
Externally publishedYes

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Earnings quality
Listed companies
Earnings predictability
Shenzhen
Fiscal
Stock exchange
Shanghai
Earnings persistence
Accruals quality

Cite this

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title = "Earnings quality and stress levels of Chinese listed companies",
abstract = "This paper investigates the relation between earnings quality and stress levels of Chinese companies listed in Shanghai and Shenzhen stock exchanges from 2003 to 2007 by classifying them as financially stressed and bankrupt (SB), financially stressed and not bankrupt (SNB), and not financially stressed and not bankrupt (NSNB) firms. We measure the earnings quality by four separate attributes: accruals quality, earnings persistence, earnings predictability, and earnings smoothness. We find that earnings quality levels are parallel to firm’s stress levels: the SB firms have the lowest earnings quality measured by each of the four earnings attributes, the SNB firms have a lower earnings quality compared with the SB firms, the NSNB firms have the highest earnings quality. We also find that the earnings quality deteriorated over the study period, the number of SB firms with the lowest earnings quality increased, and the number of NSNB firms with the highest earnings quality decreased for the fiscal years 2003 to 2007.",
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Earnings quality and stress levels of Chinese listed companies. / Abeysekera, Indra.

In: Academy of Taiwan Business Management Review, Vol. 9, No. 1, 04.2013, p. 109-116.

Research output: Contribution to journalArticleResearchpeer-review

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