*Earnings Quality of Financial Firms in Asia 1994 to 2013: The Influence of Two Financial Crises

• In Event: Country-Level Institutions and Culture

Abstract

We examine the earnings quality of Asian financial firms from 1994 to 2013, highlighting the contrasting impact of two crises – the 1997 Asian financial crisis (AFC) and the 2008 global financial crisis (GFC). In particular, we consider whether the various banking sector reforms after the AFC were successful in improving earnings quality of Asian financial firms and, therefore, resulted in these firms being less adversely affected by the 2008 GFC. Our sample of 920 firms (9,991 firm-years) from 10 Asian countries is divided into high enforcement and low enforcement groups. As expected, firms from high enforcement countries generally show higher earnings quality in terms of timely loss recognition, higher conservatism, and more value relevant earnings compared to their counterparts from low enforcement countries. Moreover, on the whole, earnings quality of the high enforcement group tends to remain high during the 1997 AFC and the 2008 GFC. We also find that firms from low enforcement countries generally improved their earnings quality after the 1997 AFC, though not immediately.

Authors

• Debbie Chua Bun Pho, University of New South Wales

• Helen Kang, UNSW Australia

• Richard Morris, University of New South Wales