Why do accruals predict earnings? |
| |
| Institution: | 1. Tuck School of Business, Dartmouth College, 305 Tuck Hall, Hanover, NH 03755, United States;2. Terry College of Business, University of Georgia, Athens, GA 30605, United States;1. Smeal College of Business, Pennsylvania State University, PA, USA;2. Gies College of Business, University of Illinois at Urbana-Champaign, IL, USA;3. School of Accountancy, Shanghai University of Finance and Economics, Shanghai, PR China;1. Fisher College of Business, The Ohio State University, 2100 Neil Avenue, Columbus, OH 43210, United States;2. Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, ON M5S 3E6, Canada;3. Carlson School of Management, University of Minnesota, 321 19th Avenue S., Minneapolis, MN 55455, United States;1. Naveen Jindal School of Management, The University of Texas, Dallas 800W Campbell Road, Richardson, TX 75080, USA;2. London Business School, Regents Park, London, NW1 4SA United Kingdom;1. Booth School of Business, The University of Chicago, United States;2. Fuqua School of Business, Duke University, Durham, United States;3. Carlson School of Management, University of Minnesota, United States |
| |
| Abstract: | Higher accruals are associated with lower subsequent earnings. We show this phenomenon can be explained by the way sales, profits, and working capital respond to changes in a firm's product markets. Empirically, high accruals predict high subsequent sales growth but a long-lasting drop in both profits and profitability. Accruals also predict an increase in future competition, suggesting that accruals are correlated with abnormally high—and, in equilibrium, transitory—true profitability that attracts new entrants to the industry. Overall, the predictive power of accruals is better explained by product-market effects than by measurement error in accruals or diminishing returns from investment. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
