Title: Underlying profits and financial reporting quality in Australia

Authors: Yiru Yang; Indra Abeysekera

Addresses: School of Business and Law, Central Queensland University, 400 Kent Street, Sydney NSW 2000, Australia ' Asia Pacific College of Business and Law, Charles Darwin University, 21 Kitchener Drive, Darwin NT 0800, Australia

Abstract: This study examines Australian Securities Exchange (ASX) 200 listed firms that reported underlying profits from years 2009 to 2012 to determine whether the underlying profits reflect accounting-based and market-based financial reporting quality. The panel-data modelling results show that there is no relationship between underlying profits and financial reporting quality. The study finds that underlying profits are positively related to earnings management, suggesting that firms engaging in opportunistic accrual management aggressively report underlying profits. The study contributes to the debates about utility of underlying profits, by empirically informing that underlying profits do not contain value-relevant information for investor decision-making.

Keywords: earnings informativeness; earnings management; earnings quality; underlying profits; Australia.

DOI: 10.1504/IJBIS.2020.10033082

International Journal of Business Information Systems, 2022 Vol.40 No.1, pp.1 - 23

Received: 24 Jan 2019
Accepted: 08 Jun 2019

Published online: 16 May 2022 *

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