Detalji o radu
Broj pregleda rada: 56
Naslov: QUALITY AND PERSISTENCE OF EARNINGS: THE CASE OF SARAJEVO STOCK EXCHANGE
Godina: 2025
Autori: ANTE DŽIDIĆ, JOSIPA GRBAVAC, BRANIMIR SKOKO
Sažetak: This study examines the quality and persistence of earnings components in a frontier market
context, analyzing 137 public companies listed on the Sarajevo Stock Exchange from 2012 to
2021. The research investigates whether the well-documented persistence hierarchy between
cash flows and accruals, as established by Sloan (1996) in developed markets, holds in
Bosnia and Herzegovina's emerging economy. Using pooled ordinary least squares and fixed
effects regression models, the study evaluates the predictive power of accrual and cash flow
components of earnings while controlling for company-level heterogeneity. The results reveal
important findings that challenge conventional wisdom from developed markets. First, the
persistence coefficients for accruals and cash flows show statistically significant but
economically marginal differences, with maximal gaps of just 0.027. The resembling
persistence between earnings components stands in contrast to Sloan's findings of a 0.09
persistence gap favouring cash flows. Second, extreme working capital volatility and episodic
cash flow shortfalls dominate earnings dynamics and decreasing, but not eliminating, the
traditional accrual-cash flow persistence hierarchy. The study proposes two explanations: (1)
institutional constraints reduce income smoothing incentives, akin to frontier-market
weaknesses; and (2) macroeconomic and operational volatility weakens the traditional
persistence differential between accruals and cash flows. These findings have important
implications for both theory and practice. Theoretically, they demonstrate how institutional
context fundamentally alters the predictive relationships between earnings components.
Practically, they caution investors, analysts, and standard-setters against mechanically
applying valuation models from mature markets in frontier economies and highlight the need
for more sensitive approaches to assessing earnings quality
Vrsta rada: Izvorni znanstveni članak
Izdanje: Region, Entrepreneurship, Development - RED
Znanstvena područja:
DRUŠTVENE ZNANOSTI