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- Publisher Website: 10.2308/accr.2001.76.3.375
- Scopus: eid_2-s2.0-0035595263
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Article: The Reversal of Abnormal Accruals and the Market Valuation of Earnings Surprises
Title | The Reversal of Abnormal Accruals and the Market Valuation of Earnings Surprises |
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Authors | |
Keywords | Abnormal Accruals Accruals Earnings Response Coefficient Earnings Surprise |
Issue Date | 2001 |
Publisher | American Accounting Association. The Journal's web site is located at http://aaapubs.aip.org/accr/ |
Citation | Accounting Review, 2001, v. 76 n. 3, p. 375-404 How to Cite? |
Abstract | If the market anticipates the reversing nature of abnormal working capital accruals, then the reported magnitude of earnings surprises that contain abnormal accruals will differ from the underlying magnitude that is priced by the market. We expect the market's perception of this difference to affect the ERCs associated with earnings surprises that contain abnormal accruals. We test our predictions using an abnormal accruals measure that captures the difference between reported working capital and a proxy for the market's expectations of the level of working capital required to support current sales levels. Consistent with our hypotheses, we find higher ERCs when abnormal accruals suppress the magnitude of earnings surprises, and lower ERCs when abnormal accruals exaggerate the magnitude of earnings surprises. We also find results consistent with analysts predictably considering the reversing implications of abnormal accruals in revising future earnings forecasts. These findings are consistent with market participants anticipating the reversing implications of abnormal accruals. However, analysis of subsequent stock returns provides evidence that market participants do not fully impound the pricing implications of abnormal accruals at the earnings announcement date. |
Persistent Identifier | http://hdl.handle.net/10722/177889 |
ISSN | 2023 Impact Factor: 4.4 2023 SCImago Journal Rankings: 4.640 |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Defond, ML | en_US |
dc.contributor.author | Park, CW | en_US |
dc.date.accessioned | 2012-12-19T09:40:42Z | - |
dc.date.available | 2012-12-19T09:40:42Z | - |
dc.date.issued | 2001 | en_US |
dc.identifier.citation | Accounting Review, 2001, v. 76 n. 3, p. 375-404 | en_US |
dc.identifier.issn | 0001-4826 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177889 | - |
dc.description.abstract | If the market anticipates the reversing nature of abnormal working capital accruals, then the reported magnitude of earnings surprises that contain abnormal accruals will differ from the underlying magnitude that is priced by the market. We expect the market's perception of this difference to affect the ERCs associated with earnings surprises that contain abnormal accruals. We test our predictions using an abnormal accruals measure that captures the difference between reported working capital and a proxy for the market's expectations of the level of working capital required to support current sales levels. Consistent with our hypotheses, we find higher ERCs when abnormal accruals suppress the magnitude of earnings surprises, and lower ERCs when abnormal accruals exaggerate the magnitude of earnings surprises. We also find results consistent with analysts predictably considering the reversing implications of abnormal accruals in revising future earnings forecasts. These findings are consistent with market participants anticipating the reversing implications of abnormal accruals. However, analysis of subsequent stock returns provides evidence that market participants do not fully impound the pricing implications of abnormal accruals at the earnings announcement date. | en_US |
dc.language | eng | en_US |
dc.publisher | American Accounting Association. The Journal's web site is located at http://aaapubs.aip.org/accr/ | en_US |
dc.relation.ispartof | Accounting Review | en_US |
dc.subject | Abnormal Accruals | en_US |
dc.subject | Accruals | en_US |
dc.subject | Earnings Response Coefficient | en_US |
dc.subject | Earnings Surprise | en_US |
dc.title | The Reversal of Abnormal Accruals and the Market Valuation of Earnings Surprises | en_US |
dc.type | Article | en_US |
dc.identifier.email | Park, CW: acparkc@hku.hk | en_US |
dc.identifier.authority | Park, CW=rp01090 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.2308/accr.2001.76.3.375 | - |
dc.identifier.scopus | eid_2-s2.0-0035595263 | en_US |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-0035595263&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 76 | en_US |
dc.identifier.issue | 3 | en_US |
dc.identifier.spage | 375 | en_US |
dc.identifier.epage | 404 | en_US |
dc.identifier.isi | WOS:000170013600005 | - |
dc.publisher.place | United States | en_US |
dc.identifier.scopusauthorid | DeFond, ML=6602107693 | en_US |
dc.identifier.scopusauthorid | Park, CW=37062708100 | en_US |
dc.identifier.issnl | 0001-4826 | - |