High Accruals Momentum

Accounting and Finance, Forthcoming

49 Pages Posted: 7 Jun 2018 Last revised: 26 Oct 2022

See all articles by Xiaoting Hao

Xiaoting Hao

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

Juwon Jang

Texas A&M University

Eunju Lee

University of Massachusetts Lowell

Date Written: January 1, 2018


We examine the information content of high accruals momentum defined as a string of high discretionary accruals for four consecutive years. We find that firms that consistently report high levels of discretionary accruals experience low subsequent returns. The results are robust after we control for annual levels of discretionary accruals for the estimation period of high accruals momentum. Furthermore, the predictive power of the high accruals momentum for future returns is strongly persistent even after the existing accruals anomaly disappears. Our results also show that the high accruals momentum impact is more pronounced for low growth firms, suggesting that the overpricing of stocks with high accruals momentum is driven by managerial discretion to manage earnings.

Keywords: Discretionary accruals, high accruals momentum, earnings management, growth anomaly, earnings momentum

JEL Classification: G12, G14

Suggested Citation

Hao, Xiaoting and Jang, Juwon and Lee, Eunju, High Accruals Momentum (January 1, 2018). Accounting and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3188172 or http://dx.doi.org/10.2139/ssrn.3188172

Xiaoting Hao

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

Juwon Jang

Texas A&M University ( email )

Langford Building A
798 Ross St.
College Station, TX 77843-3137
United States

Eunju Lee (Contact Author)

University of Massachusetts Lowell ( email )

1 University Ave
Lowell, MA 01854
United States
978-934-2520 (Phone)

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