Does cash-based operating profitability explain the accruals anomaly in China?

Qingjie Du, Yang Wang and K.C. John Wei

Pacific-Basin Finance Journal, 2020, vol. 61, issue C

Abstract: We investigate the relations between accruals, operating profitability, cash-based operating profitability, and the cross-section of expected stock returns in U.S. and Chinese markets. By replicating the main results in Ball et al. (2016 JFE), we confirm that cash-based operating profitability subsumes the return predictability of accruals and operating profitability in the U.S. market. Extending to the Chinese market, we similarly find that operating profitability and cash-based profitability can both predict returns but in contrast, operating profitability subsumes cash-based profitability.

Keywords: Accruals; Operating profitability; Cash-based operating profitability; Return predictability (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:61:y:2020:i:c:s0927538x19306870

DOI: 10.1016/j.pacfin.2020.101336

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