Accrual mispricing: Evidence from European sovereign debt crisis

摘要

Purpose: This paper examines the accrual anomaly on the European market and the impact of the financial crisis on its dynamics.Design/methodology/approach: Using a sample of public European firms, during the period 2005-2016, this paper follows Sloan (1996) seminal work and measures accruals as Dechow, Sloan and Sweeney (1995).Findings: There is no evidence that accrual anomaly persists on European markets. The study shows that, contrary to previous research, investors are not underweighting the accrual component of earnings and that accruals are not a good predictor of future stock returns.Research limitations/implications: Our study has two limitations. First, due to the lack of data, the original sample was reduced to about one third. Second, results must be interpreted carefully since the sample period may be seen as an outlier case attributed to the crisis. Research on future years may unveil a conclusion on this.Practical implications: Results suggest that transaction costs and idiosyncratic risk are no longer a barrier to investors. Results also point toward a possible new outcome in investor's behaviour during crisis. Economically, given the lower returns that can be obtained on today markets, it makes sense that investors may reduce their risk aversion levels to get more returns.Originality/value: This study contributes to the ongoing debate about accruals anomaly and market efficiency. To the best of our knowledge, it provides an original contribution to the literature by framing the accrual anomaly during the European debt crisis.