Is accrual mispricing related to investor sophistication? Evidence from analysts' forecasts

Persistent Link:
http://hdl.handle.net/10150/290579
Title:
Is accrual mispricing related to investor sophistication? Evidence from analysts' forecasts
Author:
Szwejkowski, Rafal
Issue Date:
2001
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
The relationship between accrual inefficiency in analysts' forecasts and analyst following, analysts' forecasting ability, and the relative magnitude of discretionary accruals is analyzed. Results aid in answering two research questions: (1) whether the accrual mispricing anomaly has economic substance or is merely an artifact of missing risk factors; and (2) whether the observed financial analysts' response to accounting accruals is consistent with the accrual mispricing anomaly or its origins lie elsewhere. Sloan [1996] provides evidence of abnormal market returns correlated with the prior year's accrual and cash flow components of earnings. Few possible explanations are presented in the literature for the observed phenomenon: the Naive Investor Hypothesis suggests that market participants "fixate" on earnings figures and erroneously estimate earnings persistence without regard for the impact of accruals. Alternatively there are concerns that the observed abnormal returns are merely compensation for unaccounted risk factors and thus do not constitute a departure from market efficiency. Results of this study provide evidence of accrual misinterpretation among financial analysts consistent with the pattern of mispricing that is observed in the market. This conclusion supports the view of accrual mispricing as a true market anomaly. Moreover, the naive investor hypothesis is supported by the evidence that analysts' response to accounting accruals improves with their forecasting ability and that greater analyst following leads to consensus forecasts being more efficient.
Type:
text; Dissertation-Reproduction (electronic)
Keywords:
Business Administration, Accounting.; Economics, Finance.
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Graduate College; Industrial Management
Degree Grantor:
University of Arizona
Advisor:
Dhaliwal, Dan S.

Full metadata record

DC FieldValue Language
dc.language.isoen_USen_US
dc.titleIs accrual mispricing related to investor sophistication? Evidence from analysts' forecastsen_US
dc.creatorSzwejkowski, Rafalen_US
dc.contributor.authorSzwejkowski, Rafalen_US
dc.date.issued2001en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThe relationship between accrual inefficiency in analysts' forecasts and analyst following, analysts' forecasting ability, and the relative magnitude of discretionary accruals is analyzed. Results aid in answering two research questions: (1) whether the accrual mispricing anomaly has economic substance or is merely an artifact of missing risk factors; and (2) whether the observed financial analysts' response to accounting accruals is consistent with the accrual mispricing anomaly or its origins lie elsewhere. Sloan [1996] provides evidence of abnormal market returns correlated with the prior year's accrual and cash flow components of earnings. Few possible explanations are presented in the literature for the observed phenomenon: the Naive Investor Hypothesis suggests that market participants "fixate" on earnings figures and erroneously estimate earnings persistence without regard for the impact of accruals. Alternatively there are concerns that the observed abnormal returns are merely compensation for unaccounted risk factors and thus do not constitute a departure from market efficiency. Results of this study provide evidence of accrual misinterpretation among financial analysts consistent with the pattern of mispricing that is observed in the market. This conclusion supports the view of accrual mispricing as a true market anomaly. Moreover, the naive investor hypothesis is supported by the evidence that analysts' response to accounting accruals improves with their forecasting ability and that greater analyst following leads to consensus forecasts being more efficient.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
dc.subjectBusiness Administration, Accounting.en_US
dc.subjectEconomics, Finance.en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.disciplineIndustrial Managementen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorDhaliwal, Dan S.en_US
dc.identifier.proquest3023507en_US
dc.identifier.bibrecord.b41957660en_US
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