A Deep Dive Into Earnings Quality with Columbia Professor Doron Nissim
Excess Returns
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Non-Financial Indicators That Tell Us Something About Earnings Quality
The G component in the ESG is primarily about non-financial indicators that tells us a lot about the sustainability of the earnings. For example, if earnings are going to be slightly below important benchmark, like consensus analyst forecast, this will make it more likely that managers will try to manipulate earnings. And I touched on other ones like the economy or the industry that you belong to, well, or events that happen. So there are many events, circumstances that may tell us quite a much about the likelihood that earnings are manipulated or was earnings sustainable or not.
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