Earnings Quality and Stock Returns
Date Issued
2001-11
Date
2001-11
Author(s)
Chan, Konan
Chan, K.C.
Jegadeesh, Narasimhan
Lakonishok, Josef
DOI
20060927122732289313
Abstract
An exclusive focus on bottom-line income misses important information about the quality of earnings. Ac-cruals
(the difference between accounting earnings and cash flow) are reliably, negatively associated with
future stock returns. Earnings increases that are accompanied by high accruals, suggesting low-quality
earnings, are associated with poor future returns. We explore various hypotheses — earnings manipulation,
extrapolative biases about future growth, and under-reaction to changes in business conditions —to explain
accruals’ predictive power. Distinctions between the hypotheses are based on evidence from operating per-formance,
the behavior of individual accrual items, discretionary versus nondiscretionary components of
accruals, and special items. We check for robustness using within-industry comparisons, and data on U.K.
stocks.
Publisher
臺北市:國立臺灣大學財務金融學系
Type
report
File(s)![Thumbnail Image]()
Loading...
Name
6-3.pdf
Size
430.17 KB
Format
Adobe PDF
Checksum
(MD5):abe9996a9f3ba154f5c11ccd1c98c549