Abstract

http://ssrn.com/abstract=1020670
 
 

References (67)



 
 

Citations (28)



 


 



Understanding the Accrual Anomaly


Jin (Ginger) Wu


University of Georgia - Department of Banking and Finance

Lu Zhang


Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

Frank Zhang


Yale School of Management

April 2008

Ross School of Business Paper No. 1100

Abstract:     
Interpreting accruals as working capital investment, we hypothesize that firms rationally adjust their capital investment to respond to discount rate changes. Consistent with the discount-rate hypothesis, we document that (i) the predictive power of accruals for future returns increases with the correlations of accruals with past and current stock returns;(ii) controlling for investment substantially reduces the magnitude of the accrual anomaly; (iii) the ex-ante expected returns of various accrual strategies have been stable at around 5% per annum over the past 35 years; (iv) the accounting reliability of various accrual components is inversely related to their cross-correlations with investment-to-assets; and finally (v) high accrual firms have similar corporate governance and entrenchment indexes as low accrual firms, suggesting that the accrual anomaly is unlikely to be driven by investor overreaction to over-investment.

Number of Pages in PDF File: 49

Keywords: The accruals anomaly, total accruals, discretionary accruals, net operating assets, investment-based asset pricing, capital investment, time-varying expected returns

JEL Classification: G12, G14, G31, G34, M41

working papers series


Download This Paper

Date posted: March 25, 2008 ; Last revised: September 16, 2009

Suggested Citation

Wu, Jin (Ginger) and Zhang, Lu and Zhang, Frank, Understanding the Accrual Anomaly (April 2008). Ross School of Business Paper No. 1100. Available at SSRN: http://ssrn.com/abstract=1020670 or http://dx.doi.org/10.2139/ssrn.1020670

Contact Information

Jin (Ginger) Wu
University of Georgia - Department of Banking and Finance ( email )
Terry College of Business
Athens, GA 30602-6253
United States
Lu Zhang (Contact Author)
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Frank Zhang
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Feedback to SSRN


Paper statistics
Abstract Views: 2,376
Downloads: 630
Download Rank: 20,086
References:  67
Citations:  28

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.266 seconds