The pricing of discretionary accruals

• 成果类型: Article
• 署名作者: Subramanyam, KR
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/S0165-4101(96)00434-X
• 发表日期: 1996
• 关键词: earnings management; information-content; empirical-evidence; accounting changes; Dividend policy; BONUS SCHEMES; returns; prices; manipulation; choices

摘要

This paper examines if the stock market prices discretionary accruals. Evidence reveals that, on average, the market attaches value to discretionary accruals. This evidence is consistent with two alternative Scenarios: (1) managerial discretion improves the ability of earnings to reflect economic value, and (2) discretionary accruals are opportunistic and value-irrelevant but priced by an inefficient market. Further evidence is consistent with the former explanation. There is evidence of pervasive income smoothing, which improves the persistence and predictability of reported earnings. There is also evidence that discretionary accruals predict future profitability and dividend changes. Despite several sensitivity checks, measurement error in the discretionary accruals proxy is an alternative explanation for the results.