The accrual anomaly: Australian evidence

Clinch, Greg; Fuller, Damian; Govendir, Brett; Wells, Peter

doi:10.1111/j.1467-629x.2010.00380.x

Cited by 40 publications

(53 citation statements)

References 34 publications

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“…Moreover, the table shows that the computed t-value equals 3.284, with a computed coefficient of significance of less than 0.05, which also refers the predictive value of current earnings in predicting future earnings. This result is in agreement with the findings of Al Jaber (2012), and Clinch et al (2010). The table also shows that the coefficient of the variable Big4 i.t is positive, and equals 1.34, but it has no significance.…”

Section: Asian Journal Of Finance and Accountingsupporting

confidence: 92%

The Impact of Audit Quality Features on Enhancing Earnings Quality: The Evidence of Listed Manufacturing Firms at Amman Stock Exchange

Almomani

2015

AJFA

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The study aims at investigating the impact of external audit quality features on enhancing the quality of accounting profits of the listed manufacturing firms at Amman Stock Exchange (ASE), where continuity of profit has been used as Proxy variable to express the quality of earnings. Indicators of quality of audit, audit office size, auditors' fees, period of customer's retention, type of auditor's opinion, and the specialization in client's industry, were used to measure audit quality. A sample of 45 firms had been selected, and data covering the period 2009-2013 had been collected from these firms, where 225 observations were used in the analysis. The study finds that the earnings of listed manufacturing firms at Amman Stock Exchange are with good quality, and that there is a linear relationship between external audit quality and the quality of reported earnings. Auditors' fees have most important significant effect on earnings quality, followed by auditors' opinion, where others factors has no significant effect on earnings quality. Based on these findings, the study raises several questions about the reliability of audit quality properties by stakeholders in firms, especially investors, when they check the quality of earnings, whenever they need to take a decision. The study recommends further researches regarding the issue by using other metrics to measure earnings quality, and through the addition of other properties to the quality of the audit, such as linked audit offices with auditing global offices, degree of qualification employees, and the opened lawsuits against audit office.

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Section: Asian Journal Of Finance and Accountingsupporting

confidence: 92%

The Impact of Audit Quality Features on Enhancing Earnings Quality: The Evidence of Listed Manufacturing Firms at Amman Stock Exchange

Almomani

2015

AJFA

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“…Trading Bird and Casavecchia (2007); Fairfield and Whisenant (2000); Piotroski (2000) e Chia et al (1997) f Chia et al (1997); Clinch et al (2012); Cotter (1996); Loftus and Sin (1997); Taylor and Wong (2012) g Bird and Casavecchia (2007); Soliman (2008) h Bird and Casavecchia (2007); Piotroski (2000); Soliman (2008) i Houghton and Woodliff (1987) j Houghton and Woodliff (1987) k Donaldson (1961); Myers and Majluf (1984) l Donaldson (1961); Myers and Majluf (1984).…”

Section: Datamentioning

confidence: 99%

“…The literature evaluates accounting metrics individually such as the asset growth effect (Bettman et al, 2011;Dou et al, 2012), profitability (Dou et al, 2012), leverage and liquidity effect (Gharghori et al, 2009). Furthermore, there are only a handful of papers that explicitly consider the relationship between earnings/accruals and stock returns (Chia et al, 1997;Clinch et al, 2012;Cotter, 1996;Hodgson and Stephenson-Clarke, 2000;Loftus and Sin, 1997;Taylor and Wong, 2012). There is a limited literature that investigates accruals quality and earnings management (e.g.…”

Section: Introductionmentioning

confidence: 99%

Quality investing in an Australian context

Gallagher

Gardner²,

Schmidt

et al. 2013

Australian Journal of Management

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This study extends an examination of Quality investing in the US to the Australian market. Specifically, a Quality score is computed as the aggregate of eight fundamental accounting metrics. An investment strategy investing in the highest (lowest) quality stock quintile, that is, Quintile 5 (1) generates an average annual Daniel, Grinblatt, Titman and Wermers (DGTW)-adjusted alpha of 6.37% (−7.98%), which is significant at the 5% level over April 2000-March 2010. A two-way segmentation based on size first, and quality second, reveals that the strong positive quality effect is primarily driven by small stocks, as the average DGTW-alpha for the top-quality tercile of small stocks is 14.02%, significant at the 5% level. Statistically significant positive DGTW-alphas are also determined for quality micro and large stocks. The quality analysis is also applied to a sample of Active Equity Mutual Funds' stock holdings. Weak evidence of the quality return premium is detected at the fund level.

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“…Besides the United States, there are only a few other countries where this anomaly has been detected, including Canada, Australia and the United Kingdom (Chan et al, 2006;Clinch, Fuller, Govendir, & Wells, 2012;LaFond, 2005;Pincus, Rajgopal, & Venkatachalam, 2007). In the Brazilian market, the evidence of accrual anomaly is not favorable to the existence of arbitrage opportunities.…”

Section: Conclusion and Recommendationsmentioning

confidence: 99%

Accrual anomaly in the Brazilian capital market

Cupertino

Martinez

Costa

2012

BAR, Braz. Adm. Rev.

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This paper analyzes the phenomenon known as accrual anomaly in Brazil. In particular, we examine two hypotheses: (a) that the earnings expectation included in the stock price fails to reflect the difference in persistence of the earnings components (accruals and cash flows); and (b) that the construction of a hedge portfolio by taking a long (short) position in assets with low (high) accruals generates consistently abnormal returns. The data set includes nonfinancial firms listed on the BM&FBOVESPA between 1990 and 2008. The empirical tests required conducting panel data regressions to identify the persistence of earnings and their components; the Mishkin test to identify whether the market rationally prices earnings; and the composition of a zero-investment (hedge) portfolio to analyze whether a trading strategy based on accruals consistently provides abnormal positive returns. The results indicate that the accrual component is not mispriced by the Brazilian market, and that a trading strategy based on accruals does not provide consistently positive returns. Although this evidence does not encourage arbitrage, the results are relevant from various perspectives. The methodology applied permitted identifying the quality of earnings and of their components, as well as association between the components of earnings and returns.

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The accrual anomaly: Australian evidence

Cited by 40 publications

References 34 publications

The Impact of Audit Quality Features on Enhancing Earnings Quality: The Evidence of Listed Manufacturing Firms at Amman Stock Exchange

The Impact of Audit Quality Features on Enhancing Earnings Quality: The Evidence of Listed Manufacturing Firms at Amman Stock Exchange

Quality investing in an Australian context

Accrual anomaly in the Brazilian capital market

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