Effects of Macroeconomic Variables and Product Market Competition on Earnings Quality Using Structural Equation Model

One of the criteria for economic development is the existence of capital markets that can attract investors' confidence through providing high quality financial reports. The purpose of this research is to investigate the simultaneous effect of macroeconomic variables and product market competitiveness on earnings quality. The period under study is from 2006 to 2015 and the sample is 70 companies. For analyzing the data, the algorithm of equations with partial least squares (PLS) and Smart-PLS2 software was used. The results show that the product market competition directly and indirectly (through the mediator of financial performance) has a significant positive effect on the earnings quality, but negatively influences it through the intermediary variable of the capital structure. Also, direct impact is stronger than indirect effect. Other findings suggest that macroeconomic variables from the intermediary path of financial performance have a positive effect, but the mediation of capital structure has a negative impact on the earnings quality. Also, macroeconomic variables have a direct negative relationship with the quality of profit, but this relationship is not significant.