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Accrual mispricing in the era of corporate governance reforms
Asian Review of Accounting Pub Date : 2020-05-05 , DOI: 10.1108/ara-08-2019-0143
Lan Sun

Purpose - This study is primarily motivated by the increasing concern of the academic, practitioners, regulators and standard setters regarding the quality of earnings and financial reporting. The purpose is to investigate whether the accrual anomaly exists in Australia; whether the occurrence of the accrual anomaly is attributed to the discretionary accruals component stemming from managerial discretion; and the impact of corporate governance reforms on accrual mispricing. Design/methodology/approach - This study employs the Mishkin (1983) rational expectations test to examine whether the earnings expectations embedded in stock prices accurately reflect the differential persistence of earnings components. It also employs the hedge portfolio trading strategy to examine whether taking a long position in firms with low accruals and a short position in firms with high accruals will yield positive abnormal stock returns. Findings - The results show that investors overestimate the persistence of accruals and underestimate the persistence of cash flows and subsequently, overprice the accruals and underprice the cash flows. The evidence of accrual mispricing is severe for the component of discretionary accruals. Nonetheless, the association between discretionary accruals and abnormal returns are weakened during the corporate governance reforms period. Research limitations/implications - It should be cautious to attribute the investors' ability to accurately price accruals and cash flows to the passage of corporate governance reform program. Despite there is control for firm size, book-to-market, PE multiple, growth and leverage, other macro-economic factors such as interest rates, inflation and GDP could potentially have an impact on stock returns. Practical implications - The passage of corporate governance reform program has increased the level of financial reporting disclosure and the monitoring of management, which subsequently improved accruals persistence and earnings quality. A direct practical implication is that investors should better understand the information in accruals for future earnings when the corporate disclosure environment is strengthened. Social implications - This study provides useful information to regulators, academics and investors interested in market efficiency and accrual mispricing. The results suggest that the reform of corporate governance is associated with more efficient prices. This may be of interest to the regulators who intend to improve earnings quality and financial reporting environment through the regulatory reform. Originality/value - To test the accrual anomaly in the period of corporate governance reforms is particularly useful to regulators and policy makers. It allows regulators and policy makers to gain insight as whether the change of regulation has been effective – more transparent and timely reporting of financial information are supposed to help the investors to better understand the accruals and thus mitigate the potential for accrual mispricing.

中文翻译:

公司治理改革时代的权责发生制定价错误

目的-这项研究的主要动机是学者,从业者,监管者和标准制定者对收益质量和财务报告的日益关注。目的是调查应计异常在澳大利亚是否存在;应计异常的发生是否归因于来自管理判断力的判断应计应计成分;以及公司治理改革对权责发生制定价错误的影响。设计/方法/方法-这项研究采用Mishkin(1983)的理性预期检验来检验嵌入股价的收益预期是否准确反映了收益成分的持续差异。它还采用对冲投资组合交易策略来检查在应计利润较低的公司中持有多头头寸而在应计利润较高的公司中持有短头头寸是否会产生正的异常股票收益。调查结果-结果表明,投资者高估了应计金额的持续性,并低估了现金流量的持续性,随后,高估了应计金额,并低估了现金流量。权责发生制中,权责发生制定价错误的证据很严重。尽管如此,在公司治理改革期间,可自由支配应计利润与超额收益之间的关联性被削弱。研究的局限性/含义-将投资者准确地将权责发生制和现金流量的能力归因于公司治理改革计划的通过应谨慎。尽管可以控制公司规模,市值比,市盈率倍数,增长和杠杆率,但其他宏观经济因素(例如利率,通货膨胀和GDP)可能会对股票收益产生影响。实际影响-公司治理改革计划的通过提高了财务报告披露和管理层的监控水平,从而提高了应计项目的持续性和收益质量。直接的实际含义是,当公司披露环境得到加强时,投资者应更好地理解应计费用中的信息以获取未来收益。社会影响-这项研究为对市场效率和应计错误定价感兴趣的监管机构,学者和投资者提供了有用的信息。结果表明,公司治理改革与更有效的价格相关。打算通过监管改革改善收入质量和财务报告环境的监管机构可能对此感兴趣。原创性/价值-在公司治理改革期间测试应计异常现象对监管机构和决策者特别有用。它使监管机构和政策制定者能够洞悉监管变更是否有效–应该更加透明和及时地报告财务信息,以帮助投资者更好地了解应计费用,从而减少应计错误定价的可能性。打算通过监管改革改善收入质量和财务报告环境的监管机构可能对此感兴趣。原创性/价值-在公司治理改革期间测试应计异常现象对监管机构和决策者特别有用。它使监管机构和政策制定者能够洞悉监管变更是否有效–应该更加透明和及时地报告财务信息,以帮助投资者更好地了解应计费用,从而减少应计错误定价的可能性。打算通过监管改革改善收入质量和财务报告环境的监管机构可能对此感兴趣。原创性/价值-在公司治理改革期间测试应计异常现象对监管机构和决策者特别有用。它使监管机构和政策制定者能够洞悉监管变更是否有效–应该更加透明和及时地报告财务信息,以帮助投资者更好地了解应计费用,从而减少应计错误定价的可能性。
更新日期:2020-05-05
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