search query: @indexterm model testing / total: 65
reference: 62 / 65
| Author: | DeFond, M. L. Park, C. W. |
| Title: | The Reversal of Abnormal Accruals and the Market Valuation of Earnings Surprises |
| Journal: | Accounting Review
2001 : JUL, VOL. 76:3, p. 375-404 |
| Index terms: | EARNINGS CAPITAL MODEL TESTING |
| Language: | eng |
| Abstract: | If the market anticipates the reversing nature of abnormal working capital accruals, then the reported magnitude of earnings surprises that contain abnormal accruals will differ from the underlying magnitude that is priced by the market. The authors expect the market's perception of this difference to affect the ERCs associated with earnings surprises that contain abnormal accruals. The authors test their predictions using an abnormal accruals measure that captures the difference between reported working capital and a proxy for the market's expectations of the level of working capital required to support current sales levels. Consistent with their hypotheses, the authors find higher ERCs when abnormal accruals suppress the magnitude of earnings surprises, and lower ERCs when abnormal accruals exaggerate the magnitude of earnings surprises. |
SCIMA