Earning Quality of Food and Beverage Companies Listed in the Stock Exchange of Thailand: Implication from Discretionary Accruals

Abstract

This study aims to analyze the earning quality of 24 food and beverage companies listed in the Stock Exchange of Thailand (SET) during 2007–2011 by considering earning management which is calculated as the discretionary accruals based on Kothari et al., (2005). The findings reveal that food and beverage companies obviously have earning management with the average discretionary accrual in absolute term of 5.56 percent of total assets. The findings also reveal that the earning quality of food and beverage companies in average is somewhat higher than that of overall companies in the Stock Exchange of Thailand but lower than that of overall companies in the Market for Alternative Investment (MAI). After considering the earning quality of food and beverage companies as grouped by fundamental characteristics, it was found that the companies listed in SET100 have the higher earning quality than those not listed in SET100. However, the earning quality of companies which use and do not use Big4 audit firms is not different. Additionally, the earning quality of companies of which major shareholder is individual and institution is not different, as well.