This paper examines how commonly used earnings quality measures fulfill a key objective of financial reporting, i.e., improving decision usefulness for investors. We propose a stock-price-based measure for assessing the quality of earnings quality measures. We predict that firms with higher...

Empirical studies on earnings quality use various measures that capture particular dimensions of earnings quality. This paper provides a theoretical foundation to evaluate and compare several common earnings quality measures: value relevance, persistence, predictability, smoothness, and...

This paper provides a theory of earnings quality metrics, explaining what they capture and how they are related with each other. We develop a simple economy in which a manager has market price, earnings, and smoothing incentives and can bias earnings reports. This economy provides a framework...

This paper examines how the characteristics of accounting systems and management incentives interact and collectively determine financial reporting quality. We develop a rational expectations equilibrium model that features a steady-state firm with investments, financial and non-financial...