Earnings Quality and Firm Value: Merged Evidence from a Nasdaq Company Metrics Dataset

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Published: 2022-12-30
DOI: https://doi.org/10.48161/qelj.v1n4a5
Keywords:
Earnings Quality, Firm Value, Nasdaq Companies, Beneish M-score, Financial Reporting Quality

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Nimit Sharma
School of Commerce, REVA University, Bengaluru, India
Rogash Younis Masiha
Department of Statistics, College of Science, Van Yuzuncu Yil University, Van, Turkey

Abstract

This paper integrates the uploaded article draft with an empirical dataset on Nasdaq companies to produce a data-backed study of the relationship between earnings quality and firm value. The revised design uses 102 Nasdaq-100 companies and historical firm-level ratios for 2018–2021, yielding 333 usable firm-year observations in the main panel after variable availability filters. Because the dataset does not provide a direct discretionary-accruals series or a consistent size variable, the empirical model operationalizes earnings quality as the inverse of the Beneish M-score, so that higher values indicate lower manipulation risk and therefore higher earnings quality. Firm value is proxied by the natural logarithm of the price-to-book ratio. Leverage, liquidity, profitability, and operating efficiency are included as controls. The results show that earnings quality is positively related to firm value in the firm fixed-effects specification, but the effect is only weakly significant and unstable across specifications. By contrast, leverage and gross profit to assets explain valuation more consistently. The evidence suggests that market valuation in the Nasdaq sample responds to earnings quality, but that the effect is conditional, modest, and intertwined with broader fundamental characteristics.

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Vol. 1 No. 4 (2022)

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Articles
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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