The Pricing of Discretionary Accruals Revisited: The Application of Mixtures of Regressions Based on Asymmetric Investor Behavior

Assoc. Prof. Leon Li
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Assoc. Prof. Leon Li: University of Waikato, New Zealand

International Journal of Economics and Financial Research, 2022, vol. 8, issue 3, 78-84

Abstract: This paper reexamines the issue of the pricing of discretionary accruals using the approach of mixtures of regressions. In contrast to previously documented contemporaneous results, this study retests the issue by addressing the heterogeneous perceptions and behaviors of investors when they encounter various conditions of return and risk. The empirical results of this study indicate that market investors positively value discretionary accruals when the stock they invest in experiences a rise in price and carries a low degree of risk. Conversely, investors negatively value managerial accruals for stock that shows a fall in price and carries a high degree of risk.

Keywords: Discretionary accruals; Stock returns; Mixtures of regressions; Behavioral finance. (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:arp:ijefrr:2022:p:78-84

DOI: 10.32861/ijefr.83.78.84

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