Does accounting information identify bubbles for Fama? Evidence from accruals

• 成果类型: Article
• 署名作者: Arif, Salman; Sul, Edward
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; George Washington University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101711
• 发表日期: 2024
• 关键词: Investor sentiment; stock-market; Cash flows; earnings; persistence; returns; crash; RISK

摘要

Economists have long observed that stock price bubbles are associated with corporate over- investment. We study the ex-ante identification of bubbles (i.e. stock price booms followed by busts) by examining industry-level investments in net operating asset (NOA) accruals and stock returns for 49 countries around the world. Consistent with overinvestment in operating assets being key to bubble formation, we document five findings: (1) NOA accruals positively forecast the eventual crash of an industry price run-up; (2) NOA accruals negatively forecast stock returns following a run-up; (3) NOA accruals are positively associated with investor sentiment; (4) higher NOA accruals forecast more disappointing earnings relative to analysts' expectations for run-up industries; and (5) NOA accruals are sharply stronger predictors of crashes, returns and analyst forecast errors following run-ups compared to other periods. Our results provide the first evidence that accounting information identifies stock price bubbles and suggest that financial statements are important for detecting and anticipating industry- and market-level inefficiencies.