While prior research, as noted in our paper, often uses various accrual prediction models to detect earnings management, not much is known about the accuracy, both relative and absolute, associated with these models. Our paper investigates the accuracy of six di€erent accrual prediction models, and o€ers the following ®ndings. Only the Kang ± Sivaramakrishnan (1995) model performs moderately we...

While prior research, as noted in our paper, often uses various accrual prediction models to detect earnings management, not much is known about the accuracy, both relative and absolute, associated with these models. Our paper investigates the accuracy of six different accrual prediction models, and offers the following findings. Only the Kang-Sivaramakrishnan (1995) model performs moderately w...

When corporate insiders sell their stock in quantities that deviate from firm-specific trends, their trades are more likely to precede bad news over a horizon of several months, but not in the short run. This is consistent with insiders avoiding “suspicious timing” when engaging into “suspicious amounts” of trading, the combination of which would likely result in Rule 10b-5 securities lawsuits....

We investigate whether investors price accruals quality, our proxy for the information risk associated with earnings. Measuring accruals quality (AQ) as the standard deviation of residuals from regressions relating current accruals to cash flows, we find that poorer AQ is associated with larger costs of debt and equity. This result is consistent across several alternative specifications of the ...

This paper examines how commonly used earnings quality measures fulfill a key objective of financial reporting, i.e., improving decision usefulness for investors. We propose a stock-price-based measure for assessing the quality of earnings quality measures. We predict that firms with higher earnings quality will be less mispriced than other firms. Mispricing is measured by the difference of the...

This study investigates the influence of ownership structure and board characteristics on discretionary accruals and real earnings management using the data of A-shares in Chinese Shanghai and Shenzhen Stock Exchange Securities Market from 2002 to 2012. The empirical results show that institutions with high shareholding proportion or great shareholding concentration give managers incentives to ...

Economics challenge the specification of discretionary accrual models. Since rent seeking firms pursue differentiated business strategies, firms in the same industry have heterogeneous accrual generating processes. Moreover, Schumpeter’s “creative destruction” forces existing firms to revise their extant business models. We present evidence that such business model shocks are widespread, propag...

This study examines how public and private firms in China respond to the 2008 statutory tax rate reduction from 33 percent to 25 percent. Using a proprietary dataset of private firms, we find that private firms report significantly more incomedecreasing current accruals than do public firms in 2007, the year prior to the tax rate reduction. These negative accruals were substantial and material,...

In this paper we investigate the presence of the following asset pricing anomalies viz. size, value, momentum, liquidity, accruals, profitability and net stock issues in India. Size effect is the strongest with a difference of 4.4 % per month between small and big stock returns. A positive relationship is reported between accruals, stock issues and returns and a negative relation between profit...

in this research, role of accruals in elaboration of quality of earning of the companies accepted in mumbai stock exchange has been studied and relationship between quality of earning through accruals and its constituents and abnormal stock return has been studied. the studied sample includes 35 companies in group a of mumbai stock exchange in 2009-2013.fordata analysisandhypothesistesting mult...