We are grateful to the editor Steven Cahan, an anonymous reviewer and seminar participants at the Rutgers University and American Accounting Association 2012 Annual Meeting for their valuable comments and suggestions. We also thank the Whitcomb Center for Research in Financial Services for providing research support through use of the WRDS system. We also thank Wayne State University for the travel support for American Accounting Association 2012 Annual Meeting. All errors are the authors' responsibility.
Does news play an important role in the correction process of the accrual anomaly?
Article first published online: 16 DEC 2013
© 2013 AFAANZ
Accounting & Finance
How to Cite
Kang, P. K., Palmon, D., Yezegel, A. (2013), Does news play an important role in the correction process of the accrual anomaly?. Accounting & Finance. doi: 10.1111/acfi.12060
- Article first published online: 16 DEC 2013
- Manuscript Accepted: 2 NOV 2013
- Manuscript Received: 15 AUG 2012
- Accrual anomaly;
- News releases;
- Earnings announcement;
- Market efficiency
We examine whether the financial press plays an important role in the correction of the accruals anomaly. Using 83,016 Wall Street Journal news articles published during 1993–2006, we find that a significant fraction of abnormal returns associated with the accruals trading strategy is concentrated on news days. The clustering of returns on news announcements is consistent with the financial press revealing information valuable for the correction of accruals mispricing. Further, we find that earnings-related news is more influential in the correction process than non-earnings-related news. Collectively, the results suggest that the financial press provides useful information to capital market participants.