Accounting Quality, Stock Price Delay, and Future Stock Returns

• 成果类型: Article
• 署名作者: Callen, Jeffrey L.; Khan, Mozaffar; Lu, Hai
• 署名单位: University of Toronto; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2011.01154.x
• 发表日期: 2013
• 页码: 269-295
• 关键词: internal control; cross-section; Accruals quality; DISCLOSURE LEVEL; earnings quality; INFORMATION; cost; RISK; MARKET; determinants

摘要

In frictionless capital markets with complete information and rational investors, stock prices adjust to new information instantaneously and completely. However, a substantial body of research studies information imperfections such as asymmetric information and incomplete information. Information imperfections potentially hinder timely price discovery and are likely associated with delayed stock price adjustment to information. Our first research question therefore is whether the quality of accounting information (or accounting quality) is one such information imperfection that is associated with cross-sectional variation in stock price delay. We define accounting quality as the precision with which financial reports convey information to equity investors about the firm's expected cash flows. Poor accounting quality is likely associated with higher expected returns through uncertainty about stock valuation parameters and incomplete information. Our second research question therefore is whether the accounting quality component of price delay is associated with higher future stock returns. Consistent with our hypotheses, the results show that poor accounting quality is associated with delayed price adjustment and higher future stock returns. Thus, accounting quality plays a role in timely stock price discovery.