Impact of the Accuracy of Accounting Earnings Quality Measures in Determining Credit Risks in the Banking Sector

Abstract

Accounting earnings quality is one of the topics that has attracted the attention of researchers recently. Although accounting research agrees on the importance of earnings quality, it has varied in terms of the nature of this quality and the nature of its measurement. Accordingly, this research aims primarily to determine the level of earnings quality announced in the financial statements issued by Iraqi banks listed on the stock exchange, in addition to tracking the impact of the quality of announced earnings on the stock prices of these banks. To achieve this goal, the financial statements of a number of Iraqi banks were analyzed over the years from 2016 to 2020 as required by quality measurement models, with the addition of data for the year before and the year after this period, according to the profits used in the current research. A set of results was reached, the most important of which is that there is a discrepancy in the level of quality of accounting earnings announced in the financial statements of companies listed on the stock exchange for accounting earnings quality measurement models. The research also found that the quality of Egyptian accounting earnings as measured using the indicators of earnings continuity, earnings predictability and income smoothing has no significant impact on the stock prices of companies listed on the Iraqi Stock Exchange, while the quality of accounting earnings as measured using the accruals quality index has a significant impact on stock prices.