The Number of Estimates in Footnotes and Accruals

• 成果类型: Article
• 署名作者: Chen, Huafeng (Jason); Chen, Jason Victor; Li, Feng
• 署名单位: Fudan University; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; Shanghai Jiao Tong University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4659
• 发表日期: 2024
• 关键词: accruals; estimates; persistence; accrual anomaly; Textual analysis

摘要

This study quantifies the number of estimates involved in firms' accruals and examines whether it is informative about the relation between accruals and future earnings. We measure the number of estimates using the frequency of the use of the word estimate in the qualitative portions of a firm's Notes to the Financial Statements (footnotes). Motivated by arguments regarding the impact of estimation errors in accruals, we hypothesize and find that the accruals of firms that have more estimates have a lower relation with future earnings (i.e., lower persistence) and a lower association with their past, current, and future cash flows.