Analysts' Cash Flow Forecasts and the Decline of the Accruals Anomaly

• 成果类型: Article
• 署名作者: Mohanram, Partha S.
• 署名单位: University of Toronto
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12056
• 发表日期: 2014
• 页码: 1143-1170
• 关键词: voluntary disclosure; earnings; QUALITY; INFORMATION; persistence; BIAS

摘要

The accruals anomaly, demonstrated by Sloan (1996), generated significant excess returns consistently for more than four decades until 2002 but has apparently weakened in the subsequent period. In this paper, I argue that one factor responsible for this decline is the increasing incidence of analysts' cash flow forecasts that provide markets with forecasts of future accruals. The negative relationship between accruals and future returns is significantly weaker in the presence of cash flow forecasts. This anomalous relationship becomes weaker with the initiation cash flow forecasts but continues after cash flow forecasts are terminated. Further, the mitigating effect of cash flow forecasts is greater for forecasts that are more accurate. The results are incremental to explanations based on the improved accrual quality, reduced manipulation of special items and restructuring charges and greater investment in accruals strategies by hedge funds and highlighting the increasing importance of analysts' cash flow forecasts in the appropriate valuation of stocks.