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The market pricing of accruals quality

Publication ,  Journal Article
Francis, J; LaFond, R; Olsson, P; Schipper, K
Published in: Journal of Accounting and Economics
June 1, 2005

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 costs of debt and equity. This result is consistent across several alternative specifications of the AQ metric. We also distinguish between accruals quality driven by economic fundamentals (innate AQ) versus management choices (discretionary AQ). Both components have significant cost of capital effects, but innate AQ effects are significantly larger than discretionary AQ effects. © 2005 Elsevier B.V. All rights reserved.

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Published In

Journal of Accounting and Economics

DOI

ISSN

0165-4101

Publication Date

June 1, 2005

Volume

39

Issue

2

Start / End Page

295 / 327

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

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Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). The market pricing of accruals quality. Journal of Accounting and Economics, 39(2), 295–327. https://doi.org/10.1016/j.jacceco.2004.06.003
Francis, J., R. LaFond, P. Olsson, and K. Schipper. “The market pricing of accruals quality.” Journal of Accounting and Economics 39, no. 2 (June 1, 2005): 295–327. https://doi.org/10.1016/j.jacceco.2004.06.003.
Francis J, LaFond R, Olsson P, Schipper K. The market pricing of accruals quality. Journal of Accounting and Economics. 2005 Jun 1;39(2):295–327.
Francis, J., et al. “The market pricing of accruals quality.” Journal of Accounting and Economics, vol. 39, no. 2, June 2005, pp. 295–327. Scopus, doi:10.1016/j.jacceco.2004.06.003.
Francis J, LaFond R, Olsson P, Schipper K. The market pricing of accruals quality. Journal of Accounting and Economics. 2005 Jun 1;39(2):295–327.
Journal cover image

Published In

Journal of Accounting and Economics

DOI

ISSN

0165-4101

Publication Date

June 1, 2005

Volume

39

Issue

2

Start / End Page

295 / 327

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