Accruals and price crashes

• 成果类型: Article
• 署名作者: Zhu, Wei
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-016-9355-1
• 发表日期: 2016
• 页码: 349-399
• 关键词: earnings management; stock-prices; institutional investors; rare disasters; time-series; JUMP-RISK; returns; profitability; persistence; volatility

摘要

I investigate the relation between accruals and firm-level price crashes, representing extreme price decreases in weekly returns. I find that high accruals predict a higher price crash probability than low accruals. This finding can be explained by managers' use of income-increasing accrual estimates to hoard bad news. Once accumulated bad news crosses a tipping point, it is released all at once and results in a price crash. Consistent with this explanation, I find the observed relation to be the strongest for operating assets (the least reliable accrual components). Cross-sectional analyses further support the bad news hoarding explanation.