Prof. Patricia Dechow has won the 2015 Distinguished Contribution to Accounting Literature Award, for research that developed a measure to determine the quality of earnings.
Dechow co-authored the paper, The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors, with Emory University Prof. Ilia D. Dichev.
The American Accounting Association (AAA) award recognizes high quality accounting research that has significantly impacted the discipline for at least five years. Dechow and Dichev’s earnings-quality measure has been used by researchers, practitioners, and regulators to identify poor quality earnings.
Their article, published in The Accounting Review in 2002, has received more than 2,500 citations, according to Google Scholar.
Both Dechow, the Donald H. and Ruth F. Seiler Chair in Public Accounting at Haas, and Dichev, who teaches at Emory’s Goizueta Business School, were honored with unique glass-art pieces (pictured, above) and $2,500 at an AAA ceremony in Chicago earlier this month.
Their research focused on the relationship between accrual adjustments, such as accounts receivable and accounts payable, and earnings. These adjustments help make earnings a better measure of performance, but they are also subject to management manipulation and forecast errors.
“What our paper does is look at these accruals and how they map into past, present, and future cash flows,” Dechow explains. Those that map well represent high quality earnings. Those that don’t—due either to the nature of the firm’s business or deliberate manipulation—signal less reliable earnings numbers, she says.
The award is Dechow’s second from the AAA for exceptional research in six years. In 2010, she received one of two inaugural Distinguished Contributions to Accounting Literature awards for a 1996 paper on earnings manipulation and corporate governance.