TY  - JOUR
AB  - Purpose– The purpose of this paper is to test the persistence and pricing of earnings, free cash flows (FCF) and accruals using Australian data. In response to arguments concerning omitted variables in the Mishkin test, it seeks to explore asymmetric effects by incorporating categoric variables capturing firm size (microcap, small, medium and large); industry (industrial/mining); profit making (profit/loss); and dividend paying (contemporaneous dividend/no contemporaneous dividend) into forecasting and pricing equations.Design/methodology/approach– The paper examines a large sample of hand‐checked Australian earnings, accruals and cash flow data. It analyses these data using a series of piecewise linear regressions.Findings– The results indicate that asymmetry is a valid concern since the extent and nature of mispricing of earnings components vary considerably across the categories included in the model. For example, the base case firms (microcap, loss‐making, resource companies that pay no contemporaneous dividends) exhibit no evidence of significant differences between the actual and implied persistence of FCF and accruals. Conversely, for industrial firms, the implied persistence of FCF and accruals from the pricing equation significantly underestimates the persistence of both earnings components as shown in the forecasting equation.Originality/value– The study extends the research investigating the accruals anomaly by accommodating different factors that might induce asymmetric effects. Based on the evidence, such effects represent an important consideration for work conducted in this and related accounting research areas.
VL  - 21
IS  - 1
SN  - 0114-0582
DO  - 10.1108/01140580910956830
UR  - https://doi.org/10.1108/01140580910956830
AU  - Anderson Kristen
AU  - Woodhouse Kerrie
AU  - Ramsay Alan
AU  - Faff Robert
PY  - 2009
Y1  - 2009/01/01
TI  - Testing for asymmetric effects in the accrual anomaly using piecewise linear regressions: Australian evidence
T2  - Pacific Accounting Review
PB  - Emerald Group Publishing Limited
SP  - 5
EP  - 25
Y2  - 2024/04/25
ER  -