Decomposing the Accrual Premium: The Evidence From Two Markets

Journal of Business Finance & Accounting, Forthcoming

60 Pages Posted: 9 Jun 2019

See all articles by Doina Chichernea

Doina Chichernea

University of Denver - Reiman School of Finance

Anthony Dewayne Holder

University of Denver

Alex Petkevich

The University of Toledo - Department of Finance

Date Written: May 22, 2016

Abstract

We decompose the accrual premium and study its components in the debt and equity markets. We show that the importance of each accrual component depends on the sample and the type of market considered. The short-term accruals component is primarily observed in equity markets, among small and young companies, which is consistent with mispricing arguments. The long-term accruals premium is consistently positive and significant in different samples and markets. This component reflects growth in capital expenditures, and it is counter-cyclical and predictable, which is in line with investment-based explanations. Finally, the financial accruals component does not generate predictability.

Keywords: accruals; short-term accruals; long-term accruals; investment; debt; equity

JEL Classification: G11; G12

Suggested Citation

Chichernea, Doina and Holder, Anthony Dewayne and Petkevich, Alex, Decomposing the Accrual Premium: The Evidence From Two Markets (May 22, 2016). Journal of Business Finance & Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3392512

Doina Chichernea

University of Denver - Reiman School of Finance ( email )

2101 S. University Blvd
Denver, CO 80208
United States

Anthony Dewayne Holder

University of Denver ( email )

2101 S. University Blvd. Suite 375
Denver, CO 80208
United States
3038712028 (Phone)

Alex Petkevich (Contact Author)

The University of Toledo - Department of Finance ( email )

2801 W. BANCROFT ST.
Mail Stop 103
Toledo, OH Ohio 43606
United States

HOME PAGE: http://homepages.utoledo.edu/apetkev

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