Abstract
This study investigates the association between information asymmetry and the accrual anomaly. Prior literature argues that earnings management is pronounced among firms with high information asymmetry and that earnings management is the main phenomenon behind the accrual anomaly. Using 43 205 firm-year observations from the CRSP/Compustat Merged (CCM) universe spanning 1975–2012, we provide empirical evidence that the accrual anomaly is generally concentrated in firms with higher information asymmetry. Additional analysis reveals that, investors’ greater overestimation mainly takes a place in firms with negative accruals, rather than positive accruals, due to investors’ risk-aversion tendencies.
Original language | English (US) |
---|---|
Pages (from-to) | 571-597 |
Number of pages | 27 |
Journal | Asia-Pacific Journal of Financial Studies |
Volume | 47 |
Issue number | 4 |
DOIs | |
State | Published - Aug 2018 |
Keywords
- Abnormal returns
- Accrual anomaly
- Information asymmetry
- Mishkin test
- Persistence of accruals
ASJC Scopus subject areas
- Finance