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Accruals, Disclosure and the Pricing of Future Earnings in the European Market
Author(s) -
Dargenidou Christina,
McLeay Stuart,
Raonic Ivana
Publication year - 2011
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2011.02245.x
Subject(s) - accrual , earnings , transparency (behavior) , business , affect (linguistics) , earnings response coefficient , stock (firearms) , accounting , stock market , monetary economics , economics , mechanical engineering , paleontology , horse , political science , law , biology , engineering , linguistics , philosophy
This paper examines the role of disclosure in assisting market participants to form expectations of future earnings from the accrual content of reported earnings. Using the Transparency and Disclosure ratings prepared by Standard and Poor’s, we show how disclosure and accruals jointly affect the earnings expectations that are incorporated in current stock returns, depending on the magnitude and sign of the changes in net current and net non‐current operating assets.