Abstract
The purpose of this research is to empirically validate the effect of accruals estimation errors on the quality of earnings. The quality of earnings is discussed accordingly with the conceptual framework, which allows the value relevance of earnings to become a measure of the quality of earnings. The estimation errors occurring during the process of accrual accounting will be considered as a quality of accruals and its effect on the value relevance of earnings will be discussed. As a result of such analysis, the higher the quality of accruals becomes, the higher the value relevance of earnings becomes. An implication of this study is that I focus the accrual accounting process as the resource of earnings information usefulness, and validate the relation between prediction error of accruals and the relevance of earnings as the measure of the quality of earnings using the Japanese data. There are not many empirical studies of quality of earnings using Japanese data. It is expected that this study has an implication for future research of quality of earnings in Japan.
