Title: Do earnings quality models affect different excess cash holdings models?

Authors: Mohammed M. Yassin; Saja A. Al-Kasasbeh

Addresses: Al-Zaytoonah University of Jordan, P.O. Box 130, Amman 11733, Jordan ' Al-Zaytoonah University of Jordan, P.O. Box 130, Amman 11733, Jordan

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.

Keywords: earnings quality; excess cash holdings; information asymmetry; Amman Stock Exchange; ASE; Jordan.

DOI: 10.1504/AAJFA.2023.129546

Afro-Asian Journal of Finance and Accounting, 2023 Vol.13 No.2, pp.174 - 191

Received: 28 May 2020
Accepted: 14 Dec 2020
Published online: 14 Mar 2023 *

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