Abstract:

This paper analyzes two dimensions of accounting quality under the form of earnings management and value relevance of accounting information, for a sample of 556 observations from 65 companies listed on the Bucharest Stock Exchange during 2006-2015. It separates sampled companies based on the method used for the reporting of operating cash flows. Findings show that entities using the indirect method have a higher level of discretionary accruals and are more tempted to opportunistically increase their earnings. In terms of value relevance, results show that investors in the Romanian capital market find that information reported by entities which experience high levels of discretionary accruals is more informative.