What Determines the Variability of Accounting Accruals?

Gu, Zhaoyang; Lee, Chi-Wen Jevons; Rosett, Joshua G.

doi:10.2139/ssrn.375661

What Determines the Variability of Accounting Accruals?

36 Pages Posted: 10 Mar 2003

Zhaoyang Gu

Chinese University of Hong Kong - School of Accountancy

Chi-Wen Jevons Lee

Tulane University - A.B. Freeman School of Business; Tsinghua University - School of Economics & Management

Joshua G. Rosett

Claremont McKenna College - Robert Day School of Economics and Finance

Date Written: October 2004

Abstract

The variability of accounting accruals provides a measure of the normal level of managers' accounting discretion and has important implications for event studies of earnings management. We examine how this measure is related to the economic factors including both firm characteristics and attributes of the disclosure environment. We show that the variability of accruals is related to firm size, leverage, variability of cash flows, operating cycle, growth, and other factors. Significant industry differences and temporal patterns are also found.

Keywords: Variability of Accruals, Accounting Discretion, Earnings Management

JEL Classification: M41, M43, C21

Suggested Citation: Suggested Citation

Gu, Zhaoyang and Lee, Chi-Wen Jevons and Rosett, Joshua G., What Determines the Variability of Accounting Accruals? (October 2004). Available at SSRN: https://ssrn.com/abstract=375661 or http://dx.doi.org/10.2139/ssrn.375661