Accrual Reliability, Earnings Persistence and Stock Prices

@inproceedings{Richardson2005AccrualRE,
  title={Accrual Reliability, Earnings Persistence and Stock Prices},
  author={Scott A. Richardson and Richard Sloan and Mark T. Soliman and A. Irem Tuna},
  year={2005}
}
This paper extends the work of Sloan (1996) by linking accrual reliability to earnings persistence. We construct a model showing that less reliable accruals lead to lower earnings persistence. We then develop a comprehensive balance sheet categorization of accruals and rate each category according to the reliability of the underlying accruals. Empirical tests generally confirm that less reliable categories of accruals lead to lower earnings persistence and that investors do not fully anticipate… CONTINUE READING

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