review the literature of conservatism in financial reporting indicates the importance of conservatism in accounting profession. researchers have always tried to determine the degree and ways of conservatism in financial reporting and accounting, although this is not done easily, because there is not a direct measure of conservatism. however, conservatism has been one of the key principles in ac...

Review the literature of conservatism in financial reporting indicates the importance of conservatism in accounting profession. Researchers have always tried to determine the degree and ways of conservatism in financial reporting and accounting, although this is not done easily, because there is not a direct measure of conservatism. However, conservatism has been one of the key principles in ac...

We extend the analysis in Sloan (1996) to identify the source of information in accruals about earnings quality. Our results indicate that information in accruals about earnings quality is not limited to the current accruals analyzed by Sloan, but extends to non-current accruals. We also show that while information in accruals originates almost exclusively from asset accruals, liability accrual...

This thesis examines anomalies related to the discretionary accruals usage during the tenures of CEOs in listed U.S. companies since the implementation of Sarbanes-Oxley Act. The approach used in this thesis is quantitative in nature. Four well-known discretionary accruals models: Healy model, DeAngelo model, Jones model and modified Jones are used in to separate discretionary accruals from the...

We find that the positive relation between aggregate accruals and one-year-ahead market returns documented in Hirshleifer, Hou and Teoh [2009] is driven by discretionary accruals but not normal accruals. The return forecasting power of aggregate discretionary accruals is robust to choices of sample periods, return measurements, estimation methods, business condition and risk premium proxies, an...

The accruals anomaly, demonstrated by Sloan (1996), generated significant excess returns consistently for over four decades until 2002. Since then, the accruals anomaly has apparently disappeared. In this paper, I argue that one factor responsible for this decline is the increasing incidence of analysts’ cash flow forecasts which has provided markets with information about likely future accrual...

This study explores the incremental roles of accruals and net operating cash flows in generating abnormal returns using quarterly and rolling four-quarter data for the entire population of firms, as well as specific industries. Our results show that quarterly net operating cash flow (OCF) is a stronger signal about subsequent quarter’s returns than accruals, and that this result is also true fo...

We extend Dechow and Dichev’s [2002] model of current accruals quality (CAQ) to consider total accruals quality (TAQ). While the two measures are conceptually similar (both reflect the standard deviation of the residuals from the mapping of accruals into lead and lag cash flows), they differ in terms of the definitions of accruals and cash flows as well as the number of lead and lag cash flow t...

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...