The accrual anomaly financial problem in the food supply chain

This study introduces the accrual anomaly problem in the agribusiness literature. The authors document the accrual anomaly, introduced by Sloan (1996) for the complete U.S. market, in the food supply chain. A mimicked risk-free trading strategy shorting high accrual agribusinesses and longing low accrual agribusinesses yield statistically significant annual abnormal returns of 5.9% during 1970-2004. Results for the food supply chain are different from results by Sloan and others. In particular, results for high accrual agribusiness are similar to results by Sloan for the complete U.S. market, but low accrual agribusinesses perform differently. The authors believe that this contrasting result is not industry specific, but rather a result supporting the idea that the fixation hypothesis by Sloan fails to explain the accrual anomaly problem. This is important because the fixation hypothesis is prevalent in the literature; a well-articulated hypothesis on the accrual anomaly has not yet been offered. © 2009 Wiley Periodicals, Inc.