Discussion of “The persistence of earnings and cash flows and the role of special items: Implications for the accrual anomaly”

Discussion of “The persistence of earnings and cash flows and the role of special items:... Dechow and Ge (2006, Review of Accounting Studies, 11) add new descriptive evidence to the literature on earnings behavior and investor reaction to earnings. Specifically, they find that low accrual firms with negative special items have higher returns on assets and higher market returns in future years. Their paper raises interesting questions about conservative accounting and about the effect of special items on the future performance of distressed firms. However, because the authors position their paper as an investigation of the accruals anomaly they don’t explore many of the issues they raise, and so miss an opportunity to make a more substantive contribution to our understanding of the behavior of and reaction to accounting information. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “The persistence of earnings and cash flows and the role of special items: Implications for the accrual anomaly”

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Publisher
Springer Journals
Copyright
Copyright © 2006 by Springer Science+Business Media,LLC.
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-006-9005-0
Publisher site
See Article on Publisher Site

Abstract

Dechow and Ge (2006, Review of Accounting Studies, 11) add new descriptive evidence to the literature on earnings behavior and investor reaction to earnings. Specifically, they find that low accrual firms with negative special items have higher returns on assets and higher market returns in future years. Their paper raises interesting questions about conservative accounting and about the effect of special items on the future performance of distressed firms. However, because the authors position their paper as an investigation of the accruals anomaly they don’t explore many of the issues they raise, and so miss an opportunity to make a more substantive contribution to our understanding of the behavior of and reaction to accounting information.

Journal

Review of Accounting StudiesSpringer Journals

Published: May 19, 2006

References

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