We investigate whether investors price accruals quality, our proxy for the information risk associated with earnings. Measuring accruals quality (AQ) as the standard deviation of residuals from regressions relating current accruals to cash flows, we find that poorer AQ is associated with larger...

We examine whether rational investor responses to information uncertainty explain properties of and returns to accounting-based trading anomalies. We proxy for information uncertainty with two measures of earnings quality: the standard deviation of the residuals from a Dechow and Dichev (2002)...

We analyze the link between financial reporting choices that affect accruals quality and firms' use of call options. We argue that call options used in compensation arrangements (employee stock options or ESOs) create countervailing incentives for managers to affect accruals quality. On the one...