Earnings Quality Changes Over Time: Economic Changes Against The Changes in Accounting Procedures

The main objective of this study is investigate earnings quality changes over time. The literature finds that over the past decades, there has been an increase in the volatility of earnings and a decrease in both the value relevance of earnings and the degree of matching between revenues and expenses. These changes interpret as a decline in earnings quality. But there is disagreement about whether the main reasone of decline is “due to changes in accounting procedures or real economic changes”. Thus the main goal of this study is investigate the main resone of earnings quality over time .for this perpose, all manufacturing and services firms listed in TSE during 1370-1393 were studied.The earnings quality changes rate in firms listed in Tehran Stock Exchange during 25 last years shows, the main reason of reducing the earnings quality over time is changes in the real economy not changes in accounting procedures.