Premium
Information Asymmetry and the Accrual Anomaly
Author(s) -
Park Sang Hyun,
Han Ingoo,
Lee Jaywon,
Kim Boyoung
Publication year - 2018
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12225
Subject(s) - accrual , information asymmetry , earnings management , anomaly (physics) , asymmetry , earnings , econometrics , empirical evidence , economics , business , accounting , financial economics , finance , condensed matter physics , physics , philosophy , epistemology , quantum mechanics
Abstract This study investigates the association between information asymmetry and the accrual anomaly. Prior literature argues that earnings management is pronounced among firms with high information asymmetry and that earnings management is the main phenomenon behind the accrual anomaly. Using 43 205 firm‐year observations from the CRSP /Compustat Merged ( CCM ) universe spanning 1975–2012, we provide empirical evidence that the accrual anomaly is generally concentrated in firms with higher information asymmetry. Additional analysis reveals that, investors’ greater overestimation mainly takes a place in firms with negative accruals, rather than positive accruals, due to investors’ risk‐aversion tendencies.