Measuring Earnings Quality in Saudi Arabia Insurance Companies

Earnings Quality represents the declared earnings capacity in expressing the true performance of the economic unit in addition to the continuity of earnings for the coming periods, as well as its current ability to predict future earnings. As a result of the importance of this accounting tool in measuring the results of the operational performance of economic units, the two researchers proposed a number of quantitative models aiming to measure earnings quality in insurance companies. The researchers developed some models used in earlier studies by introducing some variables into the model that would increase the explanatory capacity of the model. The study found that the proposed model is capable of measuring earnings quality in insurance companies in addition to its ability to accurately predict future earnings. The proposed classification of insurance companies in the Kingdom of Saudi Arabia according to the level of earnings quality has been achieved through the application of this model. The study also recommended the adoption and the use of the continuity model in the realization of earnings and forecasting to detect earnings quality in cooperative insurance companies.