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Accounting Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27577
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| Title: | Who, if Anyone, Reacts to Accrual Information? |
| Authors: | Battalio, Robert H.
Lerman, Alina
Livnat, Joshua
Mendenhall, Richard R. |
| Keywords: | Anomalies
Accruals
Earnings
Market efficiency |
| Issue Date: | 26-Jan-2007 |
| Series/Report no.: | Joshua Livnat-06 |
| Abstract: | We confirm and extend prior research that suggests accrual levels
predict future returns, even after controlling for earnings surprise. We
then document abnormal buying behavior around 10-K/Q filing dates that
correlates with accrual level. Specifically, we extend Collins and
Hribar (2000) by showing that the accrual anomaly persists for a sample
of firms followed by analysts after controlling for analyst earnings
forecast errors and using exact 10-K/Q filing dates. We then show that
large traders, those who initiate trades of at least 5,000 shares, tend
to trade in the correct direction in response to accrual information
released in SEC filings after preliminary earnings. This tendency is
limited, however, to cases where earnings conveyed favorable news
initially. Investors who use accrual information apparently ignore
stocks whose earnings convey unfavorable news or believe that accrual
level is not informative for these firms. We also provide some evidence
that the smallest traders react to accrual information, but in the wrong direction. |
| URI: | http://hdl.handle.net/2451/27577 |
| Appears in Collections: | Accounting Working Papers
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