Role of Temporary Accounting Distortions in Reducing Persistence of Accruals

Document Type : Research Paper

Authors

Abstract

Following Sloan (1996), numerous studies document that the accrual component of earnings is less persistent than the cash flow component of earnings. Some intelligent specialists argue that accounting distortions cause lesser persistence of accrual component of earnings. Others attribute the latter to economic indices such as growth of firms. This study consider the role of accounting distortions in lower persistence of accruals by analyzing data from the firms listed in Tehran Stock Exchange during 1377 to 1387. Our evidence shows that accounting distortion is the important factor in lower persistence of accruals. Moreover, results show that growth of sales reduces accruals persistence, and that efficient use of assets increase accruals persistence.

Keywords

References

- کردستانی، غلامرضا و ضیاءالدین مجدی ،‌(1386)، بررسی رابطة بین ویژگیهای کیفی سود و هزینة سرمایة سهام عادی، بررسیهای حسابداری و حسابرسی، شماره 48، ص 85 تا 104.
- نوروش ایرج، امین ناظمی و مهدی حیدری، (1385)، کیفیت اقلام تعهدی و سود با تأکید بر نقش خطای برآورد اقلام تعهدی، بررسیهای حسابداری و حسابرسی، شماره 43، ص 135 تا 15.
- Chan, K., Chan, L., Jegadeesh, N. and Lakonishok, J. (2006), "Earnings Quality and Stock Returns," Journal of Business, Vol. 79, pp. 1041-1082.
- Dechow, P., (1994), "Accounting Earnings and Cash Flows as Measures of Firm Performance: the Role of Accounting Accruals," Journal of Accounting & Economics, Vol. 18, pp. 3-42.
- Dechow, P. M., and Dichev, I. D. (2002), "The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors," The Accounting Review, Vol. 77, pp. 35-59.
- Fairfield, P., Whisenant, J. and Yohn, T. (2003a), "Accrued Earnings and Growth: Implications for Future Profitability and Market Mispricing," The Accounting Review, Vol. 78, pp. 353-371.
- Healy, P., (1985), "The Effect of Bonus Schemes on Accounting Decisions," Journal of Accounting and Economics, Vol. 7, pp. 85-107.
- Jones, J., (1991), "Earnings Management during Import Relief Investigations," Journal of Accounting Research, Vol. 29, pp. 193-228.
- Richardson, S., Sloan, R., Soliman, M. and Tuna, I. (2005), "Accrual Reliability, Earnings Persistence and Stock Prices," Journal of Accounting and Economics, Vol. 39, pp. 437-485.
- Richardson, S., Sloan, R., Soliman, M. and Tuna, I. (2006), "The Implications of Accounting Distortions and Growth for Accruals and Profitability," The Accounting Review, Vol. 81, pp. 713-744.
- Sloan, R., (1996), "Do Stock Prices fully Reflect Information in Accruals and Cash flows about Future Earnings?" The Accounting Review, Vol. 71, pp. 289-315.
- Thomas, J., and Zhang, H. (2001), "Inventory Changes and Future Returns," The Review of Accounting Studies, Vol. 7, pp. 163-187.
- Xie, H. (2001), "The Mispricing of Abnormal Accruals," The Accounting Review, Vol. 76, pp. 357-373.
Journal of Accounting Knowledge
Volume 2, Issue 4 - Serial Number 4
November 2011
Pages 49-64

Files

History

  • Receive Date: 15 November 2010
  • Revise Date: 30 January 2011
  • Accept Date: 16 March 2011

Share

How to cite

Statistics