Earnings quality, insider trading, and cost of capital

• 成果类型: Article
• 署名作者: Aboody, D; Hughes, J; Liu, J
• 署名单位: University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2005.00185.x
• 发表日期: 2005
• 页码: 651-673
• 关键词: Information asymmetry; DISCLOSURE LEVEL; equilibrium; RISK; accruals

摘要

Previous research argues that earnings quality measured as the unsigned abnormal accruals, proxies for information asymmetries that affect cost of capital. We examine this argument directly in two stages. In the first stage, we estimate firms' exposure to an earnings quality factor in the context of a Fama-French three-factor model augmented by the return on a factor-mimicking portfolio that is long in low earnings quality firms and short in high earnings quality firms. In the second stage, we examine whether the earnings quality factor is priced and whether insider trading is more profitable for firms with higher exposure to that factor. Generally speaking, we find evidence consistent with pricing of the earnings quality factor and insiders trading more profitably in firms with higher exposure to that factor.