Accruals and Value/Growth Anomalies: New Evidence on Their Relation

27 Pages Posted: 16 Sep 2007 Last revised: 22 Jun 2010

See all articles by Gikas A. Hardouvelis

Gikas A. Hardouvelis

University of Piraeus; Centre for Economic Policy Research (CEPR)

George A. Papanastasopoulos

University of Piraeus - Department of Business Administration

Dimitrios D. Thomakos

University of Peloponnese - School of Management, Economics and Informatics

Tao Wang

City University of New York (CUNY) - Department of Economics

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Date Written: March 12, 2010

Abstract

In this paper, we find that firms with low (high) accruals experience positive (negative) abnormal returns only when they are characterized by high (low) value/growth measures (book to market ratio and free cash flow yield). The level of accruals of those firms is found to be attributable to both growth and earnings management. Further, our evidence implies that the predictive power of accruals for future returns could be incremental to that of book to market ratio. At the same time, free cash flow yield subsumes the predictive power of both accruals and book to market ratio.

Keywords: accrual anomaly, value/growth anomaly, earnings management

JEL Classification: M4

Suggested Citation

Hardouvelis, Gikas A. and Papanastasopoulos, George A. and Thomakos, Dimitrios D. and Wang, Tao, Accruals and Value/Growth Anomalies: New Evidence on Their Relation (March 12, 2010). Available at SSRN: https://ssrn.com/abstract=1014389 or http://dx.doi.org/10.2139/ssrn.1014389

Gikas A. Hardouvelis

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
+32010 4142323 (Phone)
+3210 6724848 (Fax)

HOME PAGE: http://www.eurobank.gr

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

George A. Papanastasopoulos (Contact Author)

University of Piraeus - Department of Business Administration ( email )

80, KARAOLI & DIMITRIOU,PIRAEUS
Piraeus, 18534
Greece

Dimitrios D. Thomakos

University of Peloponnese - School of Management, Economics and Informatics ( email )

Department of Economics
22100 Tripolis
Greece
+30 2710 230139 (Fax)

HOME PAGE: http://es.uop.gr/

Tao Wang

City University of New York (CUNY) - Department of Economics ( email )

65-30 Kissena Blvd
Flushing, NY 11367-1597
United States

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