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Is the Accrual Anomaly a Global Anomaly?

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  • LaFond, Ryan

Abstract

This paper investigates the subsequent return implications of accruals within a sample of large, developed, international equity markets and assesses whether similar institutional features account for the accrual anomaly across countries. I investigate the returns implications of accruals in 17 countries over the 1989 to 2003 time period. In general, the results of country-specific analysis indicate that the accrual anomaly is a global phenomenon. After decomposing total accruals, I find, in general, that accrual mispricing is largest for working capital accruals, specifically current asset accruals. However, the results of further analysis suggest that there is no dominant factor that explains the accrual anomaly internationally. Overall, the results indicate that the accrual anomaly is present in international markets yet the factor(s) driving the accrual anomaly appear to vary across markets.

Suggested Citation

  • LaFond, Ryan, 2005. "Is the Accrual Anomaly a Global Anomaly?," Working papers 27856, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  • Handle: RePEc:mit:sloanp:27856
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    File URL: http://hdl.handle.net/1721.1/27856
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    Cited by:

    1. Jawad Mohammad & Attiya Yasmin Javid, 2015. "An Analysis of Accrual Anomaly in Case of Karachi Stock Exchange," PIDE-Working Papers 2015:116, Pakistan Institute of Development Economics.
    2. Diana MURESAN & Monica Ioana POP SILAGHI, 2014. "Empirical evidence on cross-country differences in explaining accruals anomaly," Romanian Journal of Economics, Institute of National Economy, vol. 39(2(48)), pages 121-132, December.
    3. Nuno Soares & Andrew Stark, 2009. "The accruals anomaly – can implementable portfolio strategies be developed that are profitable net of transactions costs in the UK?," Accounting and Business Research, Taylor & Francis Journals, vol. 39(4), pages 321-345.
    4. Igor Goncharov & Allan Hodgson & Suntharee Lhaopadchan & Sonia Sanabria, 2013. "Asymmetric trading by insiders – comparing abnormal returns and earnings prediction in Spain and Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 163-184, March.
    5. Carlos Omar Trejo-Pech & Magdy Noguera & Angel Samaniego-Alcantar & Richard N. Weldon, 2012. "The Relationship Between Accruals, Earnings, And Cash Flows: Evidence From Latin America," Accounting & Taxation, The Institute for Business and Finance Research, vol. 4(1), pages 95-107.
    6. Khan, Mozaffar, 2008. "Are accruals mispriced Evidence from tests of an Intertemporal Capital Asset Pricing Model," Journal of Accounting and Economics, Elsevier, vol. 45(1), pages 55-77, March.
    7. Markus Leippold & Harald Lohre, 2012. "Data snooping and the global accrual anomaly," Applied Financial Economics, Taylor & Francis Journals, vol. 22(7), pages 509-535, April.
    8. Richardson, Scott & Tuna, Irem & Wysocki, Peter, 2010. "Accounting anomalies and fundamental analysis: A review of recent research advances," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 410-454, December.
    9. Papanastasopoulos, Georgios A., 2015. "Accruals, growth, accounting distortions and stock returns: The case of FRS3 in the UK," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 39-54.
    10. Diana MURESAN, 2015. "The Mishkin Test: An Analysis Of Model Extensions," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 7, pages 393-400, April.
    11. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    12. Christoph Kaserer & Carmen Klingler, 2008. "The Accrual Anomaly Under Different Accounting Standards - Lessons Learned from the German Experiment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(7-8), pages 837-859.
    13. Cordeiro Moreira, Jeíce Catrine & Lima, Gerlando A.S.F. & Góis, Alan Diógenes, 2019. "Effects of institutional factors on the accruals anomaly in Latin America," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 36(C), pages 1-1.

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