The Impact of Accounting Earnings Quality on Financial Performance: An Applied Study in Banks Operating in Yemen

Abstract

The study aimed to measure the impact of accounting earnings quality on the financial performance of banks operating in Yemen. A quantitative research approach was adopted, and the study population consisted of the ten banks operating in Yemen. Data were collected using financial statements for the period from 2010 to 2020. The data were analyzed through the Partial Least Squares–Structural Equation Modeling (PLS-SEM). The results revealed a statistically significant positive impact of accounting earnings quality on financial performance. Specifically, the findings indicated a positive effect of earnings persistence on the financial performance of banks, while there is a negative effect for both accrual quality and earnings predictability. Moreover, the results demonstrated that earnings persistence is the most influential sub-dimension in explaining financial performance, as it best reflects the stability and sustainability of financial results, whereas the other dimensions exhibited negligible influence. In light of these findings, the study recommends that banks focus on strengthening earnings sustainability policies and enhancing financial transparency in order to increase investor and stakeholder confidence and improve financial performance.