THE ROLE OF EARNINGS QUALITY IN PREDICTING FINANCIAL FAILURE

Abstract

This study seeks to determine how earnings quality predicts financial failure and shapes predictive model capabilities. The study sample includes 35 Iraq Stock Exchange-listed corporations between 2014-2020. To measure earnings quality models, the required data was collected between 2009 and 2021. The study's findings suggest that incorporating earnings quality models boosts the predictive power of both Altman (1968) and Ohlson (1980) models. Results also show that Altman’s model, modified with the earnings quality variable, scored higher than Ohlson’s in predictive power.