Accrual anomaly and corporate financing activities

Georgios Papanastasopoulos

Finance Research Letters, 2017, vol. 20, issue C, 125-129

Abstract: We examine the mispricing versus rational explanation of the accrual anomaly for U.K. listed firms by focusing on the interaction between accruals and equity financing activities. Portfolio-level analyses and firm-level regressions indicate that the negative relation of accruals with future profitability and stock returns occurs only when firms with low accruals that repurchase equity and firms with high accruals that issue equity are considered. In contrary, this negative relation is dampened by the inclusion of firms with low (high) accruals that issue (repurchase) equity. Our evidence suggests that investors misprice accruals in U.K. and casts doubt on the rational explanation.

Keywords: Accruals; Profitability; Returns; Mispricing; Risk (search for similar items in EconPapers)
JEL-codes: G1 M4 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:20:y:2017:i:c:p:125-129

DOI: 10.1016/j.frl.2016.09.012

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