Title page for ETD etd-03172006-101515

Type of Document Dissertation
Author Barua, Abhijit
Author's Email Address abarua1@lsu.edu
URN etd-03172006-101515
Title Using the FASB's Qualitative Characteristics in Earnings Quality Measures
Degree Doctor of Philosophy (Ph.D.)
Department Accounting
Advisory Committee
Advisor Name Title
John Kenneth Reynolds Committee Chair
Jacquelyn Sue Moffit Committee Member
Ji-Chai Lin Committee Member
Joseph A. Legoria Committee Member
William M. Cready Committee Member
Jeffrey M. Gillespie Dean's Representative
  • relevance and reliability
  • accruals
  • earnings quality
  • fasb
  • value relevance
  • conceptual framework
Date of Defense 2006-02-07
Availability unrestricted
In this study, I develop a measure of earnings quality by using qualitative characteristics of financial statement information specified in the Statement of Financial Accounting Concepts (SFAC) No. 2 (FASB 1980). I derive a summary measure of earnings quality by applying factor analysis on fifteen variables representing different components of two primary dimensions of earnings quality: relevance and reliability. I then test the validity of the earnings quality construct by examining whether the construct reflects decision usefulness that is operationalized in two ways: value relevance and cost of capital analyses. I provide empirical evidence suggesting that the earnings quality construct reflects decision usefulness to investors, which is consistent with the FASB's assertion. Finally, I explore the relative desirability of each dimension in light of decision usefulness of earnings information, and find that investors, in general, prefer the relevance to the reliability dimension of earnings.
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