Accruals Quality, Stock Returns, and Macroeconomic Conditions

• 成果类型: Article
• 署名作者: Kim, Dongcheol; Qi, Yaxuan
• 署名单位: Korea University; Concordia University - Canada
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2010.85.3.937
• 发表日期: 2010
• 页码: 937-978
• 关键词: BOOK-TO-MARKET; earnings quality; Information risk; cross-section; DISCLOSURE LEVEL; cost; momentum; price; REEXAMINATION; liquidity

摘要

This study examines whether and how earnings quality, measured as accruals quality (AQ), affects the cost of equity capital. Using two-stage cross-sectional regression tests, we find that the AQ risk factor is significantly priced, after controlling for low-priced stocks. This result is robust in tests using individual stocks, various portfolio formations, and different beta estimations. Furthermore, we show that AQ and its pricing effect systematically vary with business cycles and macroeconomic variables. In particular, this pricing effect is prominent in total AQ and innate AQ but not in discretionary AQ. The risk premium associated with AQ exists only in economic expansion but not in recession periods. Poorer AQ firms are more vulnerable to macroeconomic shocks. The risk premium and the dispersion of AQ are also related to future economic activity. Overall, our results suggest that AQ contributes to the cost of equity capital and that its pricing effect is associated with fundamental risk.