Article2008

The Accrual Anomaly Under Different Accounting Standards – Lessons Learned from the German Experiment

57 citations0/0 files storedJournal of Business Finance &amp Accounting

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Auditing, Earnings Management, Governance Financial Markets and Investment Strategies Accounting Theory and Financial Reporting

Abstract

Abstract: Several studies document that investors systematically overreact to accrual‐based accounting information. We address the question to what extent this accrual anomaly is related to different accounting standards. We provide empirical evidence that the accrual anomaly is also present in Germany. However, this anomaly seems mainly to be driven by firms presenting their financial statements under IFRS or US‐GAAP, while the anomaly is unlikely to exist for those firms complying with German GAAP. It is argued that introducing true and fair view accounting, like IFRS, that relies on difficult‐to‐verify information, may not be suitable to improve accounting information quality in the context of a weak corporate governance system.

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1991Earnings Management During Import Relief Investigations 2000Investor protection and corporate governance 2003Earnings management and investor protection: an international comparison 1996Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future Earnings?2000The Economic Consequences of Increased Disclosure 1997Do Stock Prices Fully Reflect Information in Accruals and Cash Flows about Future Earnings?1999The Economic Consequences of Increased Disclosure 2002Errors in Estimating Accruals: Implications for Empirical Research

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