A Deep Dive Into Earnings Quality with Columbia Professor Doron Nissim
Excess Returns
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Earnings Quality - What Is It?
A valuable company is one that has earnings power, which means it can expect to see them in the future too. Earnings of high quality are less likely to have been manipulated by a company. But even if earnings manipulation is not going to be detected, it's still costly. If you're overstating earnings today, this means that you are understating earnings in the future.
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