How the Financial Technology and Data Access Revolution Reshape Earnings Quality and Firm Valuation

This study investigates the influence of data-driven technologies on the relationship between earnings quality (EQ) and the Price-to-Earnings (P/E) ratio across three distinct periods: 2003-2009, 2010-2016, and 2017-2023. Analyzing 25,848 firm-year observations from nonfinancial companies, the research evaluates how advancements in big data analytics and artificial intelligence have transformed financial transparency and firm valuation. The findings highlight a progressive strengthening of the EQ-P/E relationship. During 2003-2009, the association was weak, reflecting the limited adoption of advanced technologies and the reliance on traditional financial reporting methods. In 2010-2016, the initial integration of big data analytics significantly improved transparency, as evidenced by the Cash Conversion Ratio's (CCR) negative association with P/E ratios. By 2017-2023, the widespread application of artificial intelligence further amplified this relationship, with the Modified Jones Model emerging as a strong predictor of firm valuation. These findings provide practical insights for policymakers, investors, and managers seeking to leverage technological advancements while addressing the associated risks of misuse and manipulation in financial reporting.