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Title: The accrual anomaly : effects of financial statement presentation format on less-informed investors.
Authors: Low, Bernardine Mei Fong.
Keywords: DRNTU::Business::Accounting::Financial statements and analysis
Issue Date: 2004
Abstract: I examine whether investors exhibit greater ability to discriminate between high-accrual and low-accrual firms when they have more knowledge of earnings persistence and when accrual information is presented more clearly in the financial statements. Using an experimental approach, I manipulate in the financial statements the presence, juxtaposition, and placement of accrual line items and an accrual subtotal that sums up the accrual line items. I also manipulate whether the firm's earnings consist of high accruals and low cash flows or low accruals and high cash flows and measure investors' knowledge of earnings persistence. I find that high-knowledge investors better discriminate between high-accrual and low-accrual firms than low-knowledge investors. High-knowledge investors are not affected by the financial statement format of accrual information. Low-knowledge investors discriminate the most when the accrual subtotal is juxtaposed with accrual line items either in the income statement or in the cash flow statement. Low-knowledge investors do not discriminate much when the subtotal is not presented or when it is presented but is not juxtaposed with accrual line items.
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:NBS Research Reports (Staff & Graduate Students)

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