DOES EARNINGS QUALITY MODERATE THE PREDICTIVE CONTENT OF NONOPERATING INCOME?

  • Slamet Sugiri Universitas Gadjah Mada
Keywords: earnings quality, income smoothing, moderating, nonoperating income, predictive content

Abstract

The objective of this study is to empirically examine a hypothesis that earnings quality enhances the ability of nonoperating income to predict future operating cash flow. The magnitude of income smoothing index, measured by Eckel’s (1981) index formula, is used to capture a firm’s quality level of earnings. Higher index is assumed to represent higher level of earnings quality. A linear regression model is developed to test the hypothesis. The model parameters are estimated based on sixty-two manufacturing firms listed in the Jakarta Stock Exchange (JSX) up to the end of 1997. This study finds empirical evidence that supports the proposed hypothesis. That is, earnings quality enhances the predictive content of nonoperating income.

References

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Published
2004-01-12
How to Cite
Sugiri, S. (2004). DOES EARNINGS QUALITY MODERATE THE PREDICTIVE CONTENT OF NONOPERATING INCOME?. Gadjah Mada International Journal of Business, 6(2), 275 - 291. Retrieved from https://journal.ugm.ac.id/v3/gamaijb/article/view/14480
Section
Articles