Accrual or Cash Flow Anomaly? Evidence from New Zealand
Abstract
This paper investigates the presence of the accrual and the cash flow anomalies in the New Zealand stock market for the period of 1987 to 2003. We observe insignificant evidence of the accrual anomaly but find strong evidence of the presence of the cash flow anomaly. However, from 1987 to 1992 – a period before the introduction of the Companies and the Financial Reporting Acts 1993 – the presence of the accrual anomaly was statistically significant suggesting that the introduction of the FRA had a significant impact on the occurrence of the anomaly. We observe further that firms with high discretionary accruals experience significant negative future stock returns. This evidence is consistent with the notion that managers of these firms engage in earnings management.
Keywords
Citation
Koerniadi, H. and Tourani‐Rad, A. (2007), "Accrual or Cash Flow Anomaly? Evidence from New Zealand", Accounting Research Journal, Vol. 20 No. 1, pp. 21-36. https://doi.org/10.1108/10309610780000687
Publisher
:Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited