This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Earnings Quality and Stock Returns

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Konan Chan (University of Hong Kong and National Taiwan University)
Louis K. C. Chan (University of Illinois at Urbana-Champaign and Hong Kong University of Science and Technology)
Narasimhan Jegadeesh (Emory University)
Josef Lakonishok (University of Illinois at Urbana-Champaign and National Bureau of Economic Research)
Abstract

An exclusive focus on bottom-line income misses important information contained in accruals (the difference between accounting earnings and cash flow) about the quality of earnings. Earnings increases that are accompanied by high accruals, suggesting low-quality earnings, are associated with poor future returns. We explore various hypotheses—earnings manipulation, extrapolative biases about future growth, and underreaction to changes in business conditions—to explain accruals' predictive power. Checks for robustness using within-industry comparisons and data on U.K. stocks are also provided.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB790302
File Format: application/pdf
File Function: main text
Download Restriction: no

Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 3 (May)
Pages: 1041-1082
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:3:p:1041-1082

Contact details of provider:
Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
Web page: http://www.journals.uchicago.edu/JB/home.html

Order Information:
Web: http://www.journals.uchicago.edu/JB/home.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Berger, Allen N. & Udell, Gregory F., 2005. "A more complete conceptual framework for financing of small and medium enterprises," Policy Research Working Paper Series 3795, The World Bank. [Downloadable!]
  2. Trejo-Pech, Carlos Omar & Weldon, Richard N. & Gunderson, Michael A., 2008. "Working Capital and Stock Returns for American Agribusiness Firms," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6266, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. R. Andergassen, 2008. "Product Market Competition, Incentives and Fraudulent Behavior," Working Papers 638, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  4. James Angel & Douglas McCabe, 2008. "The Ethics of Managerial Compensation: The Case of Executive Stock Options," Journal of Business Ethics, Springer, vol. 78(1), pages 225-235, March. [Downloadable!] (restricted)
  5. Georgios Papanastasopoulos & Dimitrios Thomakos & Tao Wang, 2007. "Information in Balance Sheets about Future Stock Returns: Evidence from Net Operating Assets," Working Papers 0009, University of Peloponnese, Department of Economics. [Downloadable!]
  6. Kothari, S.P. & Loutskina, Elena & Nikolaev, Valeri, 2006. "Agency theory of overvalued equity as an explanation for the accrual anomaly," Discussion Paper 103, Tilburg University, Center for Economic Research. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can include your works in the database easily by uploading them on the Munich Personal RePEc Archive (MPRA) if you do not have access to an institutional RePEc archive.

This page was last updated on 2009-12-2.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.