Influences of the accruals generation processes on the accrual anomaly
- Publication Type:
- Thesis
- Issue Date:
- 2011
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This thesis re-examines the accrual anomaly identified by Sloan (1996) to determine if
this result is a consequence of particular aspects of research design. In particular,
whether there are differences in the implications of accruals for the persistence of
earnings across different accrual types, and whether the implications of accruals for the
persistence of earnings differ across firms. Evidence is provided that accruals
components are not homogeneous, and have differing implications for the persistence of
earnings. Significantly, where cash flows lag earnings recognition (e.g., sales made on
credit) they have greater implications for the persistence of earnings. Evidence is also
provided of differences in implications of accruals for the persistence of earnings across
firms. Differences between the actual implications for persistence, and those inferred
from prices, are greatest where the earnings return relation is weakest. Critically, while
new insights are provided into the accrual anomaly, a complete explanation has yet to
be determined.
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