Accruals quality vis-à-vis disclosure quality: Substitutes or complements?

Mouselli, Sulaiman and Jaafar, Aziz and Hussainey, Khaled (2012) Accruals quality vis-à-vis disclosure quality: Substitutes or complements? British Accounting Review, 44 (1). pp. 36-46. ISSN 0890-8389

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Abstract

The impact of accruals quality and disclosure quality on stock returns is a topical issue in market-based accounting research. Most of the debate is centred on their incremental ability to predict future earnings. Recent studies suggest that higher information risk proxied by either lower accruals quality or lower disclosure quality results in higher stock returns. This paper examines the relationship between accruals quality and disclosure quality, and investigates whether they are complements or substitutes in explaining the time-series variation in portfolio returns. Applying portfolio groupings, we find a positive association between accruals quality and disclosure quality, suggesting that firms with higher disclosure quality engage less in earnings management and have higher accruals quality. Asset pricing tests show that an accruals quality factor and a disclosure quality factor explain the time-series variation in the excess returns of similar sets of portfolios. This suggests that they contain similar information and confirms the substitutive nature of accruals quality and disclosure quality factors.

Item Type: Article
Article Type: Article
Uncontrolled Keywords: Accruals quality; Asset pricing; Disclosure quality; Information risk
Subjects: H Social Sciences > HG Finance
Divisions: Schools and Research Institutes > Business School > Business and Human Resource Management
Research Priority Areas: Applied Business Research
Depositing User: Anne Pengelly
Date Deposited: 12 May 2015 14:51
Last Modified: 26 Aug 2016 13:54
URI: http://eprints.glos.ac.uk/id/eprint/2256

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