Sumiyana Sumiyana

Department of Accounting, Faculty of Economics and Business, University of Gadjah Mada,

Jogyakarta, Indonesia

sumiyana@ugm.ac.id

ORCID 0000-0002-1518-9681

Different characteristics of the aggregate of accounting earnings between developed and developing countries: Evidence for predicting future GDP

Abstract. This study investigates the relationship between the aggregate of accounting earnings and the future Gross Domestic Product (GDP) differentiating between developed and developing countries. This study employs data on Asian, African, and Pacific countries along with their capital market in the period of 1989-2015. More specifically, it investigates the informativeness of aggregate accounting earnings as a predictor of macroeconomic growth. It finds evidence that the aggregate of accounting earnings is a predictor of future GDP growth. It also shows that the informativeness of accounting earnings aggregate is not only for the capital market’s level but also the macroeconomic level. This study argues that the informativeness of accounting earnings can be used to predict the macroeconomy, but only for those developed countries whose earnings growth is positive. On the contrary, this study suggests that the aggregate of accounting earnings in Asian and African developing countries cannot be used to predict future GDP growth. In other words, the aggregate of accounting earnings from developing countries does not contain similar properties for predicting future GDP growth as compared to those in developed countries.

Received: August, 2019

1st Revision: November, 2019

Accepted: February, 2020

DOI: 10.14254/2071-8330.2020/13-1/4

JEL Classification: M21, O16, P44

Keywords: accounting earnings, gross domestic product, developing countries, future growth