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A Model of Earnings Quality Strengthened by the Application of International Financial Reporting Standard in Indonesia

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As part of the financial statement, earning must be qualified, having a predictive ability and variability. The indication of quality earnings is earning persistence, referring to the possibility of quality earnings present company earnings will occur again in the future so that investors are interested in the management performance. The sample was taken by purposive sampling method on the public companies listed on the Indonesia Stock Exchange from 2008 to 2013 using interaction test (Moderated Regression Analysis). This study attempts to examine the effect of the IRFS adoption, earning and dividend against future earnings, to confirm the prospect theory, signaling theory of dividends and the benefit of earnings information through timely earning. It shows that the earning of the current period affect future earnings or earnings persistence period. The components of cash flows and earnings accrual of the current period affect future earnings or earnings persistence period. Return dividend affect the current period or the next period earnings persistence. Stock returns affect the persistence of earnings, and the adoption of IFRS in Indonesia affects the persistence of earnings and IFRS as pure moderating variables towards the effect relationship between earnings performance and the persistence of earnings, dividends with earnings persistence and stock returns towards the persistence of earnings.
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Keywords: Earning Persistence; Prospect Theory; Signaling Theory

Document Type: Research Article

Affiliations: Accounting Department, STIE Perbanas, Surabaya, Indonesia

Publication date: May 1, 2018

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