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Do earnings quality models affect different excess cash holdings models?

Do earnings quality models affect different excess cash holdings models? 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Afro-Asian Journal of Finance and Accounting Inderscience Publishers

Do earnings quality models affect different excess cash holdings models?

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd
ISSN
1751-6447
eISSN
1751-6455
DOI
10.1504/aajfa.2023.129546
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Afro-Asian Journal of Finance and AccountingInderscience Publishers

Published: Jan 1, 2023

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