Information in balance sheets for future stock returns: Evidence from net operating assets

Georgios Papanastasopoulos, Dimitrios Thomakos, Tao Wang

    Research output: Contribution to journalArticlepeer-review

    Abstract

    In this paper, we show that the negative relation of net operating assets (NOA) with future stock returns first documented by Hirshleifer et al. (2004) applies to both net working and investing pieces of NOA, while it is mostly driven by asset NOA components. Predictability of returns is significant only for their unexpected parts (unrelated to past sales growth) and not uniform across different industries. We also find that only high (low) NOA firms with asset expansion (contraction) and weak (strong) background of profitable investments exhibit negative (positive) abnormal returns. Our evidence suggests that the NOA anomaly may be present due to a combination of opportunistic earnings management and agency related overinvestment.

    Original languageEnglish
    Pages (from-to)269-282
    Number of pages14
    JournalInternational Review of Financial Analysis
    Volume20
    Issue number5
    DOIs
    Publication statusPublished - Oct 2011

    Keywords

    • Net operating assets (NOA)
    • Opportunistic earnings management
    • Overinvestment
    • Stock returns

    Fingerprint

    Dive into the research topics of 'Information in balance sheets for future stock returns: Evidence from net operating assets'. Together they form a unique fingerprint.

    Cite this