1. Does the quarterly accrual anomaly exist in Taiwan's stock market? Evidence from Manager's earnings management
- Author
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Yu‐Jia Ding and Ming‐Chang Wang
- Subjects
Earnings ,Accrual ,Strategy and Management ,Anomaly (natural sciences) ,05 social sciences ,Monetary economics ,Management Science and Operations Research ,Earnings management ,Management of Technology and Innovation ,0502 economics and business ,Economics ,Stock market ,Arbitrage ,050207 economics ,Business and International Management ,050203 business & management ,Fourth quarter - Abstract
This study investigates the existence of quarterly accrual anomalies in Taiwan's stock market. Our empirical results indicate that the arbitrage portfolios formed by the accounting accruals of the fourth‐quarter financial reports could result in abnormal returns, and thus, inferred that quarterly accrual anomalies exist. We further examined the causes of the accrual anomalies and determined that the manager conduct earnings management behavior during the fourth quarter. Managers execute discretionary accruals for management earnings forecast to meet previously issued financial forecasts, which leads to the fourth‐quarter accrual anomalies. The portfolios formed by using discretionary accruals and management earnings forecasts produce arbitrage portfolios with optimal return.
- Published
- 2020
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