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Discussion of “Investor Sophistication and the Mispricing of Accruals”

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  • Eli Bartov

    (New York University)

Abstract

Collins et al. (2003, this issue) empirically investigate the relation between accruals mispricing and institutional ownership (IO), a proxy for investor sophistication. Their results show that accruals mispricing and IO are negatively correlated; less IO, more accruals mispricing. The authors attribute this differential in accruals mispricing to institutions' superior ability to price accruals either due to superior analytical ability or due to greater access to private information. While the research question is intriguing, a number of methodological limitations may limit the reliability and generality of the findings. In this paper, I discuss these limitations and offer ways of overcoming them, as well as identify a future research avenue in the area of mispricing.

Suggested Citation

  • Eli Bartov, 2003. "Discussion of “Investor Sophistication and the Mispricing of Accruals”," Review of Accounting Studies, Springer, vol. 8(2), pages 277-281, June.
    • Handle: RePEc:spr:reaccs:v:8:y:2003:i:2:d:10.1023_a:1024469513993
    DOI: 10.1023/A:1024469513993
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    References listed on IDEAS

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    1. Steven Balsam & Eli Bartov & Carol Marquardt, 2002. "Accruals Management, Investor Sophistication, and Equity Valuation: Evidence from 10–Q Filings," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 40(4), pages 987-1012, September.
    2. Mark T. Bradshaw & Scott A. Richardson & Richard G. Sloan, 2001. "Do Analysts and Auditors Use Information in Accruals?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 39(1), pages 45-74, June.
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