The valuation of abnormal accruals and corporate governance Online publication date: Tue, 21-Oct-2014
by Godfrey Akileng; Ray Donnelly
International Journal of Managerial and Financial Accounting (IJMFA), Vol. 5, No. 4, 2013
Abstract: For the most part the extant literature considers abnormal accruals to be opportunistic and discounted by the market. However, an alternative view is that abnormal accruals signal manager's private information of firm value and profitability so are valued positively by the market. In addition, there is evidence that effective corporate governance mitigates opportunistic earnings manipulation. While prior studies have tested for the impact of corporate governance on the value relevance of earnings this study is different in that it focuses on the impact of governance on the value relevance of that part of earnings that are likely to be manipulated: abnormal accruals. Using a sample that is comprised exclusively of accounting data reported under IFRS evidence is provided that the market views abnormal accruals as being on average opportunistic. However, it also perceives this opportunism to be mitigated by effective corporate governance. These findings are robust to alternative ways of measuring abnormal accruals and their sign.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Managerial and Financial Accounting (IJMFA):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook