We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.


The authors conducted a survey of nearly 400 chief financial officers on the definition and drivers of earnings quality, with an emphasis on the prevalence and detection of earnings misrepresentation. The respondents believe that the hallmarks of earnings quality are sustainability, absence of one-time items, and backing by actual cash flows. However, they also believe that in any given period, a remarkable 20% of companies intentionally distort earnings, even while adhering to GAAP. The magnitude of the misrepresentation is large: 10% of reported earnings.

About the Author(s)

Ilia Dichev
John R. Graham
Campbell Harvey
Campbell R. Harvey

Campbell R. Harvey is professor of finance at Duke University and a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts. He served as editor of the Journal of Finance from 2006 to 2012. In 2016, he was elected president of the American Finance Association.

Shiva Rajgopal PhD

Shiva Rajgopal is the Kester and Byrnes Professor of Accounting and Auditing at the Graduate School of Business, Columbia University. He is the incoming vice dean for research at the Columbia Business School. He is the recipient of the 2006 and 2016 American Accounting Association (AAA) Notable Contribution to the Literature award, the 2006 Best Paper award from Financial Accounting Research Section of the AAA, and the 2006 and 2016 Graham and Dodd Scroll Prize given by the Financial Analysts Journal. Professor Rajgopal is also the recipient of the 2008, 2012 and 2015 Glen McLaughlin Award for Research in Accounting Ethics. He is the departmental editor of the accounting track of management science and an associate editor at the Journal of Accounting and Economics. Professor Rajgopal is widely published in finance and accounting journals. His research is frequently cited in the popular press, including The Wall Street Journal, The New York Times, Bloomberg, Fortune, Forbes, Financial Times, Business Week, and The Economist.