Journals Proceedings

Abstract

The earnings of the companies are imperative since it communicates information to stakeholders and to predict stock prices in future. However, as there is a greater possibility of managers to manipulate the recorded earnings as explain by the earnings management, the importance of recorded earnings has been eroded. Therefore, it is essential to consider the quality of earnings over reported earnings since it communicates the true portrait of the business for the stakeholders. With this milieu this study investigates the impact of earnings quality on stock returns of listed manufacturing companies in Sri Lanka during the period of 2010 to 2015. For this purpose, the study employs accruals as to measure the quality of earnings. In addition to that the study considered whether earnings or earnings quality is more influential to determine market return and whether size of the companies matters in measuring the above