The Effect of Global Financial Crisis on Earnings Quality

In the global financial crisis, managers are under pressure and in order to avoid bankruptcy, manipulate financial information to hide or postpone financial distress status. According to theoretical foundations and literature review, this research investigates one of the most important factors influencing the quality of earnings. This study uses seven criteria to measure earnings quality. These include ex-post and ex-ante conservatism, value relevance, accruals quality, earnings persistence and earnings smoothing. The global financial crisis by using zero-one dummy variable is measured. For data analysis, multivariate regression models and panel data have been used. The research statistical sample consisted of 148 companies listed in TSE during the period 2005 to 2015. Research findings shows that the financial crisis through a positive impact on some of the earnings quality criteria, including earnings persistence and smoothing, improves earnings quality and, through negative impact on the some of the other criteria, including conservatism, value relevance, accruals quality and earnings predictability, earnings quality will be reduces. The findings also indicate that earnings quality before the period of global financial crisis is more than earnings quality during the global financial crisis.