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| Date: |
April 18, 2011 (Monday) |
| Time : |
2:00pm - 2:45pm |
| Language : |
English |
| Venue : |
Room 602, Meng Wah Complex, The University of Hong Kong |
| Presented By : |
Ms. Junqi Zou, PhD candidate, Department of Accounting, Hong Kong University of Science and Technologya |
| Seminar title : |
Growth Opportunities and the Accrual Anomaly |
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| Abstract: |
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This paper adopts an equity valuation framework to reexamine the accrual anomaly. Firms with different growth opportunities have different valuation focuses, and display distinct economic and accounting characteristics. We posit that the information conveyed in accruals about future growth and profitability varies with a firm’s growth opportunities, thus giving rise to dissimilar investor behaviors in (mis)pricing accruals and cash flows for firms at different growth phases. Our evidence is consistent. We find that the accrual anomaly is more pronounced for firms at the high growth stage, and it weakens at the low growth stage and further at the decline stage. At the high growth and low growth stages, the anomaly is attributed to both overpricing of high accruals and underpricing of cash flows, whereas at the decline stage it is due to underpricing of cash flows only, with accruals correctly priced. We further find that mispricing of accruals occurs mainly for high accrual firms whereas mispricing of cash flows occurs mainly for low accrual firms, indicating that they are two distinct phenomena and one does not subsume the other. Our results suggest that a simple explanation that is fixated on a single accounting or economic attribute (such as accrual persistence or growth) is not adequate to account for changing pricing behavior across firms operating under heterogeneous conditions. |
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| All Interested are Welcomed: |
Request for presentation papers or enquires, please contact:
Miss Panda Tsu
Tel: 2241 5050 or pandatsu@business.hku.hk
The papers will also be available on the presentation.
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