This paper provides a new approach to testing for accrual-based earnings management. Our approach exploits the inherent property of accrual accounting that any accrual-based earnings management in one period must reverse in another period. If the researcher has priors concerning the timing of...

The authors synthesized and extended recent research demonstrating that investor recognition is a distinct, significant determinant of stock price movements. Realized stock returns are strongly positively related to changes in investor recognition, and expected returns are strongly negatively...

A large body of accounting research finds that various contracting incentives lead managers to engage in conservative accounting practices. We extend existing research by modeling the impact of extant accounting rules on conservative accounting. Accounting rules typically require assets to be...

We synthesize and extend recent research demonstrating that investor recognition is a distinct and significant determinant of stock price movements. Realized stock returns are strongly positively related to changes in investor recognition and expected returns are strongly negatively related to...

This paper provides a framework for defining, formulating and evaluating value investment strategies. We define the relative value of an investment in terms of the prospective yield implied by the investment's current price and expected future cash flows. We develop an intuitive and parsimonious...

We document pervasive evidence of reversals in firm-level working capital accruals over adjacent fiscal years. We demonstrate that the majority of these accrual reversals relate to ‘good' accruals that: (i) correctly anticipate future benefits; (ii) lead to higher earnings persistence; and (iii)...

Firms with low ratios of fundamentals (such as earnings and book values) to market values are known to have systematically lower future stock returns. We document that short-sellers position themselves in the stock of such firms, and then cover their positions as the ratios revert to normal...

Prior research shows that the cash component of earnings is more persistent than the accrual component of earnings. We investigate whether the persistence of the cash component is influenced by management's decision to retain or distribute cash flows. We find that when firms retain the cash...

Numerous studies have documented that the most recent annual change in net operating assets is negatively related to future stock returns. In recent work, Hirshleifer, Hou, Teoh and Zhang (2004) show that the level of net operating assets scaled by the previous year's total assets is also...