Accrual reliability, earnings persistence, and stock prices: revisited
Abstract
Purpose
The purpose of this paper is to replicate Richardson et al.’s (2005) study on how accrual components’ reliability affects earnings persistence and whether investors anticipate the lower earnings persistence through stock return. In this study, the authors use more recent data to examine whether the previous results still hold.
Design/methodology/approach
The authors run the analysis using Richardson et al.’s (2005) design of ordinary least squares and report the results using Fama and Macbeth’s (1973) procedures.
Findings
The results corroborate Richardson et al.’s (2005) conclusions that lower reliability of total accrual (accrual components) leads to lower earnings persistence.
Originality/value
This study replicates Richardson et al. (2005) using more recent US data. The results in this paper confirm the general conclusion in the original study: less reliable accruals lead to lower earnings persistence.
Keywords
Citation
Dey, R.M. and Lim, L. (2015), "Accrual reliability, earnings persistence, and stock prices: revisited", American Journal of Business, Vol. 30 No. 1, pp. 22-48. https://doi.org/10.1108/AJB-07-2014-0041
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited