The Impact of Accounting Estimates Quality on Subsequent Earnings Surprises and Net Income Volatility in Listed Iraqi Industrial Companies from 2012 to 2025

• Ibrahim Ahmed Ali Algomaili

  Author

This research aims to examine the impact of the quality of accounting provision estimation on subsequent earnings surprises and net income volatility within a sample of Iraqi industrial companies listed on the Iraq Stock Exchange during the period 2012–2025. The study is based on the premise that the quality of accounting provision estimation is a significant factor influencing earnings stability and explaining subsequent changes in financial performance. Utilizing panel data covering five Iraqi industrial companies, the study measured the quality of accounting provision estimation via the ratio of provisions to total assets and the rate of change in accounting provisions. Subsequent earnings surprises were measured by the subsequent change in net income relative to total assets, while net income volatility was measured by the standard deviation of net income relative to total assets. The methodology employed descriptive statistics, cross-sectional dependence tests, and unit root tests, followed by the estimation of two Panel ARDL models. The results revealed a significant positive impact of the provisions-to-total-assets ratio on subsequent earnings surprises and a significant negative impact of the rate of change in accounting provisions on the same variable. Furthermore, the findings indicated a significant positive impact of both the provisions-to-total-assets ratio and the rate of change in accounting provisions on net income volatility in the long run. The study concludes that the quality of accounting provision estimation is an important determinant of earnings quality and financial performance stability within the five companies included in the study sample; therefore, the findings are interpreted within the limits of this sample and the period 2012–2025.

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