Do earnings quality models affect different excess cash holdings models?

Do earnings quality models affect different excess cash holdings models?
Mohammed M. Yassin; Saja A. Al-Kasasbeh
Afro-Asian J. of Finance and Accounting, Vol. 13, No. 2 (2023) pp. 174 - 191
With the increasing cost of external financing in Jordan, excess cash holdings are a dominant feature of industrial companies listed on the Amman Stock Exchange (ASE). This study provides empirical evidence of an information asymmetry problem by examining the impact of earnings quality on excess cash holdings. The results aim to help investors and creditors to evaluate the transparency of and confidence in financial reporting to enhance decision making and minimise the risk of default. The study employed three different models for earnings quality and two different models for excess cash holdings. Through examination of panel data, the study found that firms with poor earnings quality tend to accumulate excess cash holdings in order to isolate themselves from an information asymmetry problem.

The moderating effect of audit quality on the relationship between information asymmetry and earnings management: evidence from Jordan

The moderating effect of audit quality on the relationship between information asymmetry and earnings management: evidence from Jordan
Mohammed Hassan Makhlouf; Mohammed Zakaria Soda; Yazan Oroud; Abdulhadi H. Ramadan
Afro-Asian J. of Finance and Accounting, Vol. 12, No. 2 (2022) pp. 165 - 177
This study examined how the relationship between information asymmetry and earnings management was affected by audit quality as an example of emerging markets using a sample of Jordanian industrial firms listed on the Amman stock exchange from 2015 to 2019. Fixed effect model is used to examine study hypotheses. The findings indicate that information asymmetry positively affected earnings management. Moreover, the results revealed that audit quality negatively affected the relationship between information asymmetry and earnings management, meaning that audit quality can reduce the level of information asymmetry and mitigate earnings management. This study will contribute to corporate governance and auditing literature among Jordanian firms by providing beneficial information for regulators, investors and other stakeholders about how audit quality can restrict information asymmetry and reduce earnings management. This study will be of value to firms seeking to reduce earnings management and enhance financial reporting quality by decreasing information asymmetry.

The influence of foreign currency earnings and foreign capital on earnings management

The influence of foreign currency earnings and foreign capital on earnings management
Kameshwar Rao V.S. Modekurti; K. Lubza Nihar
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 3 (2021) pp. 353 - 375
Earnings management offers scope for research due to the variety of accentuating contexts. This paper examines it in the contexts of foreign currency earnings, and foreign capital. 'Does the presence of foreign capital influence earnings management?' and 'Does the presence of foreign currency earnings influence earnings management?' are the research questions answered in this paper, taking the sample of NSE 200 companies of India, for the period 2010-2016. Evidence in this paper supports positive (negative) influence of foreign currency earnings (foreign capital), on earnings management. Results remain robust even when different measures of managed earnings, foreign earnings, and foreign capital are adopted, and also when controlled for firm level factors such as size, level of operations, and industry affiliation. This paper contributes to the meagre international literature on the theme 'international orientation and earnings management' and is the first empirical evidence on this theme from a significant emerging economy, India.

Capital structure and profitability in a tax-free country: evidence from the UAE

Capital structure and profitability in a tax-free country: evidence from the UAE
Imen Tebourbi; Irene Wei Kiong Ting; Qian Long Kweh; Harith Ali Hamood Al Huseini
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 3 (2020) pp. 430 - 444
The balance between debt and equity is a key factor explaining profitability. This study examines how capital structure affects the profitability of firms listed on stock exchanges in the United Arab Emirates (UAE), a country that does not have a federal corporate income tax regime. The proxies of capital structure used include total, short-term, and long-term debt ratios, while those of profitability are return on assets and return on equity. Over a 2001-2016 sample period, this study documents a significantly negative association between capital structure and profitability. This study finds that the negative association is mainly found in companies with a high level of debts. The results of this study not only imply that information asymmetry exists, they also highlight how capital structure and profitability are associated in the context of a corporate tax-free country.