Accounting accruals anticipate future economic benefits. They are intended to reverse upon the realization of the anticipated future benefits, such that their reversals have no net impact on future earnings. In practice, however, we show that extreme accruals exhibit a high frequency of subsequent reversals that do impact future earnings. We demonstrate that these reversals explain a number of ...

Newly public companies tend to exhibit abnormally high accruals in the year of their initial public offering (IPO). Although the prevailing view in the literature is that these accruals are caused by opportunistic misreporting, we show that these accruals do not appear to benefit managers and instead result from the normal economic activity of newly public companies. In particular, and in contr...

We use MD&A disclosures to predict current-year firm-level accruals using support-vector regressions. We call these predictions MD&A accruals. Our aim is to measure the explanatory power of MD&A disclosures for liquidity and critical accounting choices. We find that MD&A accruals explain a statistically and economically significant portion of firm-level accruals and identify more persistent acc...

We investigate the association between errors in management forecasts of subsequent year earnings and current year accruals. In an uncertain operating environment, managers’ assessments of their firms’ business prospects are imperfect. Since managers’ imperfect business assessments influence both accruals generation and earnings projection, we hypothesize that management earnings forecasts exhi...

This study investigates the effect of analyst coverage on both accrual-based and real earnings management. Regarding accrual-based earnings management, I find that firms followed by more analysts engage in less accruals management and that more experienced analysts seem to be more effective in constraining accruals management, consistent with the role of analysts as external monitors to manager...

the purpose of this paper is to investigate the association between the intellectual capital of firms and their earnings quality. the research was conducted with 158 accepted companies and 948 firm-year observations from iran stock market. empirical studies were conducted based on hypothesis by value added intellectual coefficient as measures of intellectual capital and taking absolute value of...

Title of Dissertation: An Alternative Measure to Detect Intentional Earnings Management through Discretionary Accruals Salma S. Ibrahim, 2005 Dissertation Directed By: Professor Oliver Kim, Accounting and Information Assurance Department This study proposes an alternative measure of discretionary accruals that can be used in testing for intentional earnings management. Prior research has shown ...

This paper hypothesizes that more active informed trading and intense information production help investors detect the low persistence of accruals, and consequently reduce the magnitude of accruals mis-pricing. Applying both the Mishkin (1983) and the hedge-portfolio tests to subsamples sorted on the basis of a two-way classification – accruals and one of the information production measures, we...

The accruals anomaly—the negative relationship between accounting accruals and subsequent stock returns—has been well documented in the academic and practitioner literatures for almost a decade. To the extent that this anomaly represents market inefficiency, one would expect sophisticated investors to learn about it and arbitrage the anomaly away. Yet, we show that the accruals anomaly still pe...