Growth Opportunities and Earnings Quality from Emerging Economies

We examined the causality between growth opportunities and earnings quality of the emerging economies. We develop an argument that growth opportunities should lead to high-quality earnings of the developing economies against the prior studies from developed economies which posit that growth opportunities result in a lower quality of earnings. The findings revealed that Growth Opportunities had a positive significant effect on Earnings Quality (EQ). Thus, the study concluded that growth opportunities are useful in determining the earnings quality of firms. The study recommends that managers should take advantage of their firms' growth opportunities to provide quality accounting information which will directly provide expanded opportunities for business growth. Though literature confirms that generally, earnings management might not be necessarily bad in business operational practice, managers are advised to avoid extreme aggressiveness in managing earnings as this may culminate in the negative manipulation of accounting information.