Skip to main content
Journal cover image

Aggregate accruals and market returns: The role of aggregate M&A activity

Publication ,  Journal Article
Heater, JC; Nallareddy, S; Venkatachalam, M
Published in: Journal of Accounting and Economics
November 1, 2021

Extant literature documents that aggregate accruals positively predict future market returns and attributes this relation to either changes in discount rates or systematic earnings management. We offer an alternative explanation: aggregate merger and acquisition (M&A) activity drives this relation. M&A activity affects the magnitude of accruals, which in turn drives the market return predictability of aggregate accruals. We find that the ability of both aggregate accruals and discretionary aggregate accruals (a measure of systematic earnings management) to predict market returns disappears after controlling for aggregate M&A activity. Furthermore, aggregate M&A activity predicts future market returns, consistent with a price response to improvements in macroeconomic outcomes due to aggregate M&A activity.

Duke Scholars

Published In

Journal of Accounting and Economics

DOI

ISSN

0165-4101

Publication Date

November 1, 2021

Volume

72

Issue

2-3

Related Subject Headings

  • Accounting
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1502 Banking, Finance and Investment
  • 1501 Accounting, Auditing and Accountability
  • 1402 Applied Economics
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Heater, J. C., Nallareddy, S., & Venkatachalam, M. (2021). Aggregate accruals and market returns: The role of aggregate M&A activity. Journal of Accounting and Economics, 72(2–3). https://doi.org/10.1016/j.jacceco.2021.101432
Heater, J. C., S. Nallareddy, and M. Venkatachalam. “Aggregate accruals and market returns: The role of aggregate M&A activity.” Journal of Accounting and Economics 72, no. 2–3 (November 1, 2021). https://doi.org/10.1016/j.jacceco.2021.101432.
Heater JC, Nallareddy S, Venkatachalam M. Aggregate accruals and market returns: The role of aggregate M&A activity. Journal of Accounting and Economics. 2021 Nov 1;72(2–3).
Heater, J. C., et al. “Aggregate accruals and market returns: The role of aggregate M&A activity.” Journal of Accounting and Economics, vol. 72, no. 2–3, Nov. 2021. Scopus, doi:10.1016/j.jacceco.2021.101432.
Heater JC, Nallareddy S, Venkatachalam M. Aggregate accruals and market returns: The role of aggregate M&A activity. Journal of Accounting and Economics. 2021 Nov 1;72(2–3).
Journal cover image

Published In

Journal of Accounting and Economics

DOI

ISSN

0165-4101

Publication Date

November 1, 2021

Volume

72

Issue

2-3

Related Subject Headings

  • Accounting
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1502 Banking, Finance and Investment
  • 1501 Accounting, Auditing and Accountability
  • 1402 Applied Economics