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Accounting Quality, Stock Price Delay and Future Stock Returns
Jeffrey L. Callen
University of Toronto - Rotman School of Management
Mozaffar Khan
University of Minnesota - Twin Cities - Carlson School of Management
Hai Lu
University of Toronto - Rotman School of Management
May 20, 2011
Abstract:
We test the hypotheses that (i) poor accounting quality is associated with delayed stock price adjustment to information, and (ii) the accounting quality component of price delay predicts stock returns. We define accounting quality as the precision with which financial reporting informs equity investors about future cash flows. Consistent with our hypotheses, the results suggest poor accounting quality is associated with less timely price adjustment and higher future stock returns.
Number of Pages in PDF File: 50
Keywords: Accounting Quality, Market Frictions, Stock Price Delay, Expected Returns
JEL Classification: M41, G12, G14
working papers series
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Date posted: June 11, 2009
; Last revised: May 24, 2011
Suggested CitationCallen, Jeffrey L., Khan, Mozaffar and Lu, Hai, Accounting Quality, Stock Price Delay and Future Stock Returns (May 20, 2011). Available at SSRN: http://ssrn.com/abstract=1416213 or http://dx.doi.org/10.2139/ssrn.1416213
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