Accrual reliability, earnings persistence, and stock prices: revisited

R. Mithu Dey and Lucy Lim

American Journal of Business, 2015, vol. 30, issue 1, 22-48

Abstract: Purpose - – The purpose of this paper is to replicate Richardsonet al.’s (2005) study on how accrual components’ reliability affects earnings persistence and whether investors anticipate the lower earnings persistence through stock return. In this study, the authors use more recent data to examine whether the previous results still hold. Design/methodology/approach - – The authors run the analysis using Richardsonet al.’s (2005) design of ordinary least squares and report the results using Fama and Macbeth’s (1973) procedures. Findings - – The results corroborate Richardsonet al.’s (2005) conclusions that lower reliability of total accrual (accrual components) leads to lower earnings persistence. Originality/value - – This study replicates Richardsonet al.(2005) using more recent US data. The results in this paper confirm the general conclusion in the original study: less reliable accruals lead to lower earnings persistence.

Keywords: Reliability; Market efficiency; Earnings persistence; Accruals; Capital market; Revisited (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajbpps:v:30:y:2015:i:1:p:22-48

DOI: 10.1108/AJB-07-2014-0041

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