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Explaining earnings persistence: a threshold autoregressive panel unit root approach

Jaqueson Galimberti () and César Cupertino ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes a reassessment to the hypothesis that the persistence of current earnings performance is decreasing in the magnitude of the accrual component of earnings and increasing in the magnitude of the cash flow component of earnings. For this purpose, a threshold autoregressive panel unit root approach is proposed using a Fisher-type. This approach allowed us to distinguish between unconditioned and conditioned measures of persistence, making it possible to infer whether the earnings components condition its persistence. The approach was applied to a sample of 126 Brazilian firms in the period from 1995 to 2007. Our main results are the finding of relevant earnings persistence heterogeneity between the firms in the sample, a relatively lower unconditioned measure of earnings persistence, and a partial rejection of the hypothesis afore mentioned, specifically about the effects of the accruals components over the earnings persistence.

Keywords: earnings persistence; accruals; threshold autoregressions; panel unit root tests (search for similar items in EconPapers)
JEL-codes: M41 C23 G10 (search for similar items in EconPapers)
Date: 2009-03-23
New Economics Papers: this item is included in nep-acc and nep-lab
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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