Decomposing the Accrual Premium: The Evidence from Two Markets

34 Pages Posted: 27 May 2020

See all articles by Doina Chichernea

Doina Chichernea

University of Denver - Reiman School of Finance

Anthony Holder

University of Denver - School of Accountancy

Alex Petkevich

The University of Toledo - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July/August 2019

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, debt, equity, investment, long‐term accruals, short‐term accruals

JEL Classification: G11, G12

Suggested Citation

Chichernea, Doina and Holder, Anthony and Petkevich, Alex, Decomposing the Accrual Premium: The Evidence from Two Markets (July/August 2019). Journal of Business Finance & Accounting, Vol. 46, Issue 7-8, pp. 879-912, 2019, Available at SSRN: https://ssrn.com/abstract=3604482 or http://dx.doi.org/10.1111/jbfa.12394

Doina Chichernea (Contact Author)

University of Denver - Reiman School of Finance ( email )

2101 S. University Blvd
Denver, CO 80208
United States

Anthony Holder

University of Denver - School of Accountancy ( email )

2101 South University
Boulevard, Suite 355
Denver, CO 80208-8921
United States

Alex Petkevich

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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