The Accrual Anomaly: International Evidence
By Morton Pincus, Shivaram Rajgopal, Mohan Venkatachalam. 2003
346 citations recorded by the source corpus.
We consider stock markets in 20 countries to investigate whether the accrual anomaly (Sloan 1996), characterized by U.S. stock prices overweighting the role of accrual persistence, is a local manifestation of a global phenomenon.We explore whether the occurrence of the anomaly is related to country differences in accounting and institutional structures, and examine alternative explanations for its occurrence. We find stock prices overweight accruals in general, with accruals overweighting occurring in countries with a common law relative to a code law tradition. Using firmlevel data on a country‐by‐country basis, we document the occurrence of the anomaly in four countries, Australia, Canada, the U.K., and the U.S., and also in a sample of American Depository Receipts (ADRs) of firms domiciled in countries where we do not detect the anomaly. Using country‐level data, we confirm the anomaly is more likely to occur in countries having a common law tradition, and also in countries allowing extensive use of ac...
Subfields: Accounting, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/356770ce2060d89024d5a6c85ea1a9b9625ebb0d
How researchers see this paper
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In Accounting
- Shivaram Rajgopal
- Martin Walker
- Weili Ge
- Terry Shevlin
- Catherine Schrand
- Patricia M. Dechow
- Leif Atle Beisland
- Mohan Venkatachalam
In Strategy and Management
- Shivaram Rajgopal
- Martin Walker
- Weili Ge
- Leif Atle Beisland
- Catherine Schrand
- Terry Shevlin
- Patricia M. Dechow
- Mark Maffett
Citations in the corpus
- R2 and Idiosyncratic Risk are not Interchangeable (2014, background): “…as a proxy for barriers to arbitrage (e.g., Wurgler and Zhuravskaya 2002; Ali, Hwang, and Trombley 2003; Mendenhall 2004; Mashruwala et al. 2006; Pontiff 2006; Pincus, Rajgopal, and Venkatachalam 2007; Cohen, Dey, Lys, and Sunder 2007; Brav, Heaton, and Li 2010; Hirshleifer, Teoh, and Yu 2011).”
- IFRS Adoption and Accounting Quality: A Review (2007, background): “For example, Pincus et al. (2007) find that accrual anomaly is more prevalent in common law countries.”
- A Review of the Value Relevance Literature (2009, methodology): “When using country-level data, Pincus, Rajgopal and Venkatachal [107] report that this anomaly is more likely to occur in countries having a common law tradition than in countries with a code law tradition.”
- Why is the Accrual Anomaly not Arbitraged Away? The Role of Idiosyncratic Risk and Transaction Costs (2006, background): “, 2003); (v) is due to mergers and divestitures (Zach, 2003); and (vi) is generalizable to international markets (Pincus et al., 2005).”
- Financial Reporting Opacity and Informed Trading by International Institutional Investors (2012, methodology): “Prior research such as Teoh and Wong (1993) and DeFond and Jiambalvo (1993) suggests ‘Big5’ auditor oversight is associated with higher quality accounting data.”
- Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences (2010, background): “Pincus et al. (2007) also provide somewhat weaker evidence suggesting that the accrual anomaly is negatively related to investor rights.”
- How far can we trust earnings numbers? What research tells us about earnings management (2013, background): “Pincus et al. (2007) consider the role of AM and the accruals anomaly in an international setting.”