The Relationship between Financial and Non-financial Characteristics of the Firm With Accrual Quality

In this paper, the relationship between financial and non-financial characteristics of the firms with accrual quality is studied. The population of this study consists of all companies listed on Tehranُ s Stock Exchange during the period of 2001- 2008. Our approach to measure the accrual quality is the residuals from regressions of changes in working capital on past, present, and future operating cash flows. The standard deviation of these residuals is our measure of accruals quality, where a higher standard deviation signifies lower quality. We document that financial and non-financial characteristics of the firms (e. g., volatility of accruals, volatility of earnings, probability of negative earning, magnitude of accruals, operation cycle, firm size, and volatility of cash flow) can be used as instruments for evaluation of accrual quality.