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The accrual anomaly : exploring the optimal investment hypothesis by Wu, Jin Ginger. is a book available to read on EtoBox.

What is The accrual anomaly : exploring the optimal investment hypothesis about?

Interpreting accruals as working capital investment, we hypothesize that firms rationally adjust their investment to respond to discount rate changes. Consistent with the optimal investment hypothesis, we document that (i) the predictive power of accruals for future stock returns increases with the covariations of accruals with past and current stock returns, and (ii) adding investment-based factors into standard factor regressions substantially reduces the magnitude of the accrual anomaly. High accrual firms also have similar corporate governance and entrenchment indexes as low accrual firms. This evidence suggests that the accrual anomaly is more likely to be driven by optimal investment than by investor overreaction to excessive growth or over-investment

Author

Wu, Jin Ginger.

Publisher

National Bureau of Economic Research, c2007.

Published

2007

Language

EN