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The purpose of this paper is to examine the impact of audit quality, measured by financial statements audited by the big four accounting firms, on the investors' ability to predict future earnings for profitable and unprofitable firms.

The paper uses the returns‐earnings regression model and interacts all independent variables in this model with a dummy variable, AUDIT, which is set to equal one if financial statements audited by the big four accounting firms, zero otherwise. Future earnings response coefficient is the measure of earnings predictability.

The paper finds that investors are able to better anticipate future earnings when financial statements are audited by the big four accounting firms. However, the findings are not applicable for unprofitable firms.

The findings of the paper have implications for auditing related academic research and the users of financial statements. In particular, the study shows that the big four accounting firms have not lost their audit quality advantage and that financial statements audited by the big four accounting firms are arguably of higher quality than those audited by non‐big four accounting firms.

It is believed that there is no UK study to date examining the association of the quality of financial statements audited by the big four accounting firms and the returns‐earnings association. Consequently, this paper significantly contributes to the limited literature on the perceived value relevance of audit quality.

The article hypothesizes that the level of reputation affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The hypothesis exploits the following: the positive relationship between reputation and firms' risk‐return profiles, and managers' incentives in using discretionary accounting accrual adjustments. Results show that reputation is positively associated with earnings' explanatory power for returns, and related to the magnitude of accounting accrual adjustments.

Discusses three theories on the link between multinationality and investment value (internalization, imperfect world capital markets and managerial objectives) and develops hypotheses on its relationship with the informativeness of accounting earnings and levels of discretionary accruals. Tests them on 1994‐1998 data from a sample of US multinationals using regression techniques; and presents the results which suggest that the level of multinationality is positively related to the magnitude of discretionary accruals and to the informativeness of accounting earnings.

This study focuses on a survey of chief financial officers (CFOs) in public firms in Japan concerning the following six points: the importance of the definition earnings quality; higher quality earnings; the determinants of earnings quality; prevalence, magnitude, and motivation of earnings management; accounting that influences earnings quality; and misrepresenting of earnings. The results are following: first, Japanese CFOs define earnings quality as earnings accurately reflecting economic reality, earnings accurately reflecting the results of operations, and earnings backed by cash flows, earnings sustainability, recurring, and consistent, and earnings reflecting long-term trend importance. Second, Japanese firms consider earnings that reflect consistent reporting choices over time as higher quality. They do not consider that earnings having accruals that are eventually realized as cash flow as higher earnings quality. Third, Japanese CFOs indicate that 30% of earnings quality is impacted by firm characteristics such as firm’s business model, industry, and macroeconomic conditions. Surprisingly, the influence of the board of directors is greater than the impact of their internal controls. Fourth, as for the determinants of earnings quality, CFOs consider that more than 70% of Japanese CFOs do not allow the discretion and that accounting standards limit their ability to report higher earning quality. Fifth, Japanese CFOs consider that higher earnings are influenced by accounting principles such as policies that match expenses with revenues and policies that rely on fair value accounting as much as possible. Sixth, CFOs themselves predict that 50% of Japanese firms use discretions and that they use 20% of earnings per share (EPS). Since there is inside and outside pressure to hit earnings benchmarks, Japanese firms possess the motivation to use earnings to misrepresent economic performance, Japanese managers see a red flag when generally accepted accounting principle’s earnings do not correlate with cash flow from operations.

The purpose of the study is to investigate the association of earnings and cash flows with stock prices and returns, and the impact of regulatory changes on the value relevance of accounting numbers.

The authors examine a sample of non-financial firms listed on the Belgrade Stock Exchange from 2005 to 2018 and use three regression models – price, return and differenced.

The authors find evidence that accounting earnings are more value relevant than cash flows. The authors also find negative relation of earnings changes with stock returns and argue that this is due to the lower persistence of negative earnings levels and changes. Finally, the authors find that the value relevance of accounting information in Serbia increases after the improvements in capital market regulation.

Given the empirical focus on a transition economy, the widespread applicability of the study is limited. The findings, however, call for more research on transition economies to better understand the functioning of capital markets and the way information from financial statements is incorporated into stock prices.

The results imply that policymakers in transition economies should improve the accounting and capital market regulation to provide better investor protection and to improve the capital market conditions.

The authors add to knowledge about the value relevance of accounting information in emerging and transition economies. The results could be of interest to standard setters in their efforts to better understand and improve the quality of accounting information in emerging and transition economies.

We review and analyze the accounting literature that examines the effects of accounting conservatism on financial statements and financial statement users. We begin by analyzing how conservatism affects the reported numbers on the financial statements. These studies primarily evaluate how conservatism affects earnings quality, including earnings persistence and the presence of earnings management. Next, we assess the effect of accounting conservatism on the users of the financial statements. We identify three primary users of the financial statements: (1) equity market users (2) debt market users and (3) corporate governance users. Within each of these categories, we analyze the findings of prior research and explore unanswered research questions. By analyzing the effects of accounting conservatism from a diverse range of research topics, we inform the discussion on the costs and benefits of accounting conservatism.

This study aims to examine whether accounting comparability between two firms, as measured by De Franco et al. (2011), reflects closeness in the amounts of cash flows and accruals between the firms.

Using 278,452 pair-year observations over the years 2003–2019, the author evaluates the research question using regression models.

Closeness in cash flows and closeness in accruals both increase accounting comparability and the effect of closeness in cash flows is greater. The effect of closeness in earnings is greater than the combined effects of closeness in cash flows and accruals. Earnings quality strengthens, while product closeness weakens, the effects of closeness in earnings and closeness in cash flows.

To the best of the authors’ knowledge, this study is the first to empirically test the link between the closeness in earnings components and accounting comparability. This study is also the first to examine cash flows versus accruals in the context of accounting comparability.

The aim of this paper is twofold: first, it aims to examine the relevance of earnings and book values on stock prices, and second, to test for the effect of speculative intensity on the relevance of accounting information between 1995 and 2004.

The data were collected from a sample of 101 non‐financial firms listed at the Athens Stock Exchange over the period 1996‐2004 and were analyzed using OLS regression models.

Results indicated that book values are not relevant when they are considered solely, but both earnings and book values are more relevant when they are simultaneously included in the model. Finally, taking into consideration the effect of speculative intensity, we observed that it has a positive and significant effect on stock prices yet the value relevance of earnings and book values has not changed even after controlling for speculation.

The findings can be used by analysts and capital market researchers since both must bear in mind the fact that the quality of the capital market and the quality of the stock prices are not constant over time. Consequently, the classical valuation models are misspecified and could yield significant bias if speculative intensity is not taken under consideration.

The findings provide a further insight on the issue of accounting relevance within the context of an emerging capital market like Greece. According to our knowledge this is the first study which concerns speculation as an important factor of accounting value relevance in an European country.

The purpose of this paper is to consider the impact of the drachma's replacement by the euro on the quality of accounting information published by Greek listed firms.

The authors examined how the adoption of the euro currency impacted on the timeliness of income recognition and the relevance of accounting information during the pre and post euro adoption periods using a sample of 176 listed firms over the period 1995‐2008.

Convincing evidence was found that the euro contributed to a decrease on the value relevance of accounting information, an increase in the conservatism of financial statements and finally a reduction in the earnings management behavior of managers.

By considering the impact of the common currency on the quality of accounting information, analysts are more able to provide accurate estimates on firms' future prospects, thus contributing to less information asymmetries among stock market participants.

The results could be proved useful to regulators since they indicate that financial accounting information prepared after the adoption of the euro currency has inferior value relevance. Therefore, if regulators want to develop an efficient financial market they need to address this effect by developing relative legislation that promotes the quality of accounting information.

The majority of studies on the issue of the euro have focused on matters of macroeconomic stability, corporate investments and valuation and market integration. No research until now has studied the impact of euro adoption on the quality of accounting information and how accounting quality is perceived by market participants during the pre and post‐euro adoption periods.