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Information Asymmetry and the Accrual Anomaly

Information Asymmetry and the Accrual Anomaly This study investigates the association between information asymmetry and the accrual anomaly. Prior literature argues that earnings management is pronounced among firms with high information asymmetry and that earnings management is the main phenomenon behind the accrual anomaly. Using 43 205 firm‐year observations from the CRSP/Compustat Merged (CCM) universe spanning 1975–2012, we provide empirical evidence that the accrual anomaly is generally concentrated in firms with higher information asymmetry. Additional analysis reveals that, investors’ greater overestimation mainly takes a place in firms with negative accruals, rather than positive accruals, due to investors’ risk‐aversion tendencies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Financial Studies Wiley

Information Asymmetry and the Accrual Anomaly

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Publisher
Wiley
Copyright
Copyright © 2018 Korean Securities Association
ISSN
2041-9945
eISSN
2041-6156
DOI
10.1111/ajfs.12225
Publisher site
See Article on Publisher Site

Abstract

This study investigates the association between information asymmetry and the accrual anomaly. Prior literature argues that earnings management is pronounced among firms with high information asymmetry and that earnings management is the main phenomenon behind the accrual anomaly. Using 43 205 firm‐year observations from the CRSP/Compustat Merged (CCM) universe spanning 1975–2012, we provide empirical evidence that the accrual anomaly is generally concentrated in firms with higher information asymmetry. Additional analysis reveals that, investors’ greater overestimation mainly takes a place in firms with negative accruals, rather than positive accruals, due to investors’ risk‐aversion tendencies.

Journal

Asia-Pacific Journal of Financial Studies – Wiley

Published: Jan 1, 2018

Keywords: ; ; ; ;

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