Earnings volatility, cash flow volatility, and informed trading

• 成果类型: Article
• 署名作者: Jayaraman, Sudarshan
• 署名单位: Washington University (WUSTL)
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2008.00293.x
• 发表日期: 2008
• 页码: 809-851
• 关键词: BID-ASK SPREAD; price-signal relations; private information; stock returns; cross-section; firm size; MARKET; management; accruals; announcements

摘要

I examine whether earnings that are smoother or more volatile than cash flows provide or garble information. Consistent with theories that predict more informed trading when public information is less informative, I find that bid-ask spreads and the probability of informed trading are higher both when earnings are smoother than cash flows and also when earnings are more volatile than cash flows. Additional tests suggest that managers' discretionary choices that lead to smoother or more volatile earnings than cash flows garble information, on average. However, I find that informed trading is attenuated in settings in which theory suggests that discretionary smoothing or volatizing of earnings is likely to be informative.