Asymmetric Returns and the Economic Content of Accruals and Investment

Luca Del Viva (), S. P. Kothari (), Neophytos Lambertides () and Lenos Trigeorgis ()
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Luca Del Viva: Department of Economics, Finance, and Accounting, ESADE Business School, Ramon Lull University, 08172 Barcelona, Spain
S. P. Kothari: U.S. Securities and Exchange Commission, Washington, District of Columbia 20549; MIT Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142 (on leave)
Neophytos Lambertides: Department of Commerce, Finance and Shipping, Cyprus University of Technology, Limassol 3036, Cyprus
Lenos Trigeorgis: Department of Accounting and Finance, University of Cyprus, Nicosia 1678, Cyprus

Management Science, 2021, vol. 67, issue 6, 3921-3942

Abstract: This study contributes to our understanding of what accruals capture and how they relate to the distribution of future returns. It examines the past and future growth components of accruals and shows that, whereas past growth is negatively associated with idiosyncratic skewness, future growth is positively associated with it. In addition, although both past and future growth are negatively associated with future returns, the association is more pronounced for past growth when volatility is lower, but for future growth when volatility is higher. The study also shows that the association between the future growth component and future returns reverses in the long run, whereas the association between past growth and future returns does not.

Keywords: investment and accruals; nonlinear equity value; asymmetric returns; idiosyncratic skewness (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:6:p:3921-3942

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