The pricing of descretionary accruals - evidence from Pakistan.
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Date
2015
Journal Title
Journal ISSN
Volume Title
Publisher
Journal of Management and Research.
Abstract
Even now with the cutting edge businesses and specialized management, a large
number of the firms are owned by families in Pakistan. Agency disagreements and
issues exist between the management and the owners as well as the minority
shareholders and the block holders. To handle these feuds, accountants use
discretionary accruals. These accruals help to manage earnings and smooth
sharp trends to protect the interest of management and the owners. This study
determines whether the investors manage the earnings through discretionary
accruals or do they price these accruals when considering the stock price. This
study finds significant evidence that the market prices discretionary accruals. We
find that the firms with higher number of institutional ownership, high quality
audit production and higher number of independent board have significantly
higher impact of discretionary accruals on their stock returns as compared to
other firms.
Description
Keywords
Finance, Pricing, Discretionary Accruals, Earnings Management, Audit quality.
Citation
Khalid, Z., Yasser, F., & Ajmal, M. M. (2015). The pricing of descretionary accruals - evidence from Pakistan. Journal of Management and Research, 2(2).(Zunera Khalid, Farah Yasser and Muhammad Mobeen Ajmal) (UMT Journal)