TY - JOUR
T1 - The accrual anomaly in the U.K. stock market
T2 - Implications of growth and accounting distortions
AU - Doukakis, Leonidas C.
AU - Papanastasopoulos, Georgios A.
PY - 2014
Y1 - 2014
N2 - On the basis of an accrual decomposition into two components capturing output growth and accounting distortions, this paper analyzes the effects of accounting accruals on firms' future performance in the U.K. stock market. Findings reveal a strong negative association of accruals with future profitability and stock returns. The effect of accruals on future earnings performance is driven only by the component attributable to accounting distortions, and the accrual effect on stock price performance is driven by both the component attributable to accounting distortions and the component attributable to growth. These two components complement each other in driving the accrual effect on stock returns.
AB - On the basis of an accrual decomposition into two components capturing output growth and accounting distortions, this paper analyzes the effects of accounting accruals on firms' future performance in the U.K. stock market. Findings reveal a strong negative association of accruals with future profitability and stock returns. The effect of accruals on future earnings performance is driven only by the component attributable to accounting distortions, and the accrual effect on stock price performance is driven by both the component attributable to accounting distortions and the component attributable to growth. These two components complement each other in driving the accrual effect on stock returns.
KW - Accounting distortions
KW - Accruals
KW - Growth
KW - Profitability
KW - Stock returns
UR - http://www.scopus.com/inward/record.url?scp=84904308334&partnerID=8YFLogxK
U2 - 10.1016/j.intfin.2014.06.006
DO - 10.1016/j.intfin.2014.06.006
M3 - Article
AN - SCOPUS:84904308334
SN - 1042-4431
VL - 32
SP - 256
EP - 277
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
IS - 1
ER -