Improving Profitability Forecasts with Information on Earnings Quality

Matthias Demmer
Prior literature documents the usefulness of the DuPont disaggregation for predicting firms’ future profitability, operating income, and stock market returns. In addition, research also emphasizes the importance of earnings quality information. However, there is a lack of research examining how earnings quality affects forecasts of profitability. This paper explores whether different earnings quality factors moderate the accuracy of profitability forecasts. This study contributes to the existing literature along three dimensions. First, contrary to financial statement...
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