The Reversal of Abnormal Accruals and the Market Valuation of Earnings Surprises

By Mark L. Defond, Chul W. Park. 2001

614 citations recorded by the source corpus.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/0568ced71a78cf65dca614a8c559120f6d81a8f1

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Jeong‐Bon Kim
2. Liandong Zhang
3. Jere R. Francis
4. Weili Ge
5. Ebraheem Saleem Salem Alzoubi
6. Catherine Schrand
7. A. Vanstraelen
8. Dechun Wang

In Strategy and Management

1. Jeong‐Bon Kim
2. Liandong Zhang
3. Dechun Wang
4. Weili Ge
5. Catherine Schrand
6. Patricia M. Dechow
7. Jere R. Francis
8. A. Vanstraelen

Citations in the corpus

• Short Selling and Earnings Management: A Controlled Experiment (2016, neutral): “argued as a sign for high earnings quality rather than the reverse (e.g., Holthausen and Verrecchia, 1988; Shivakumar, 2000; DeFond and Park, 2001).”
• THE MISPRICING OF ABNORMAL ACCRUALS (2001, methodology): “DeFond and Park (2001), on the other hand, investigate whether the market valuation of earnings surprises (i.e., the earnings response coefficient or ERC) for good and bad news firms, respectively, differs across income-increasing and income-decreasing abnormal accruals, and whether the market…”
• The Effect of China's Weak Institutional Environment on the Quality of Big 4 Audits (2015, neutral): “We measure financial reporting quality using abnormal working capital accruals (DeFond and Park 2001; Carey and Simnett 2006) and abnormal accruals estimated using the Jones (1991) model.”
• Audit quality, debt financing, and earnings management: Evidence from Jordan (2017, methodology): “Finally, so as to control AC CE PT ED M AN US CR IP T for the possible bias in the discretionary accruals estimation in the modified Jones model, this study used alternative accruals decomposition models; for example, the Jones model (1991), and DeFond and Park (2001).”
• Mandatory Audit Firm Rotation and Audit Quality (2016, methodology): “Therefore, we measure AWCA as an estimate of abnormal accruals as suggested by DeFond and Park (2001).”
• Assessing France's Joint Audit Requirement: Are Two Heads Better than One? (2006, methodology): “Expected accruals are based on a linear model in DeFond and Park (2001) in which the prior year’s ratio of current accruals to sales is applied to next-period sales to predict next-period accruals.”
• Earnings management within Europe: the effects of member state audit environment, audit firm quality and international capital markets (2006, methodology): “Normal working capital is assumed to be a fixed proportion of sales (Dechow and Kothari, 1998; DeFond and Park, 2001).”
• Accrual Reversals, Earnings and Stock Returns (2013, neutral): “studies is Defond and Park (2001). They model normal working capital accruals as a function of sales growth and show that the remaining „abnormal‟ accruals are less persistent and that stock prices and analysts‟ earnings forecasts at least partially anticipate the lower persistence of abnormal accru”
• Quarterly Earnings Patterns and Earnings Management (2007, neutral): “This is consistent with DeFond and Park (2001) who document higher ERCs when abnormal (working capital) accruals suppress the magnitude of earnings surprises and lower ERCs when abnormal accruals exaggerate the magnitude of earnings surprises.”