The Pricing of Discretionary Accruals: Evidence from the Canadian Stock Market

Posted: 26 Aug 2004

See all articles by Mohamed Chakib Kolsi

Mohamed Chakib Kolsi

University of Sfax - High Institute of Business Studies Sfax Tunisia

Hamadi Matoussi

University of Manouba - Gestion

Abstract

This paper examines the pricing of discretionary accruals of a sample of 159 Canadian listed firms. According to previous literature, firms' accounting manipulations are explained by the opportunism of managers. As a result discretionary accruals are negatively priced by an efficient capital market. However, an other stream of research argues that discretionary accruals are positively priced by an efficient market as they reduce information asymmetry and capture information non-reflected by non-discretionary earnings. As a consequence, discretionary accruals enhance the capacity of reported earnings to reflect the firm's real performance. The evidence of our study is consistent with the latter scenario. Our findings are robust to alternative models of discretionary accruals, to income increasing vs. income decreasing, to the level of financial performance and to the benchmark of the financial market.

Keywords: Discretionary accruals, efficient capital markets, firm performance

JEL Classification: M41, M43, G12, G14

Suggested Citation

Kolsi, Mohamed Chakib and Matoussi, Hamadi, The Pricing of Discretionary Accruals: Evidence from the Canadian Stock Market. Available at SSRN: https://ssrn.com/abstract=568411 or http://dx.doi.org/10.2139/ssrn.568411

Mohamed Chakib Kolsi (Contact Author)

University of Sfax - High Institute of Business Studies Sfax Tunisia ( email )

Sfax
Tunisia

Hamadi Matoussi

University of Manouba - Gestion ( email )

Campus Universitaire de la Manouba
Manouba 2010, 2010
Tunisia
216-71-600 705 (Phone)
216-71-602 404 (Fax)

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