THE IMPACT OF INCOME SMOOTHING AND EARNINGS QUALITY ON THE VALUATION OF COMPANIES: A CASE OF PALESTINIAN COMPANIES
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Date
2022-07-19
Authors
Fatheyeh Hakam Najar
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Abstract
This thesis investigates the effect of income smoothing and earnings quality on the valuation of companies listed in the Palestine Exchange market using annual data covering the period between Jan 2010 to Dec 2019. Income smoothing is qualified as reducing the fluctuations in the reported income within the accounting standards and is detected by the model of Eckel (1981). Managers have several motivates to smooth their reported incomes, for example, to optimize their bonus rewards. Panel analysis was used in this thesis. To achieve the objectives of this research, the researcher employed FGSL.
The results indicate that earnings quality as measured by timeliness is significantly negatively influencing TQ and ROE. However, earnings quality as measured by accruals is significantly positively influencing ROE. Income smoothing has been significantly positive with ROE.
Future studies on income smoothing and earnings quality may consider the financial sectors in the Palestine Exchange(PEX). Apply another method in measuring the variables of the study.
Key Words: Income Smoothing, Earnings Management, Persistence, Earnings Quality, Eckel Model , Palestine.