The financial reporting quality effect on European firm performance

Cláudia Maria Ferreira Pereira Lopes (), António Cerqueira () and Elísio Brandão ()
Additional contact information
Cláudia Maria Ferreira Pereira Lopes: Instituto Superior de Contabilidade e Administração do Porto
António Cerqueira: Faculdade de Economia da Universidade do Porto
Elísio Brandão: Faculdade de Economia da Universidade do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper analyses whether accounting quality produces any impact on firm performance using only accounting data: the abnormal accruals methodology to evaluate accounting quality and ROA to determine firm performance. This is important because accounting information guides investment decisions (Bradshaw et al., 2004 and Verdi, 2006). For 17 European countries, findings confirm the mechanical relationship between accruals and accounting measures of performance: income increasing abnormal accruals, which mean decreasing accounting quality, will increase ROA and vice-versa. In addition, the lag effect is analysed, as per Chan et al. (2004). When current performance is compared with the abnormal accruals of the previous year, results suggest that the reverse effect does not occur for two consecutive years.

Keywords: Accounting quality; firm performance; abnormal accruals (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2011-02
New Economics Papers: this item is included in nep-acc and nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.fep.up.pt/investigacao/workingpapers/11.02.23_wp403.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.fep.up.pt/investigacao/workingpapers/11.02.23_wp403.pdf [302 Found]--> https://fep.up.pt/investigacao/workingpapers/11.02.23_wp403.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:403

Access Statistics for this paper

More papers in FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto Contact information at EDIRC.
Bibliographic data for series maintained by ().