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ACCRUAL QUALITY AND EXPECTED RETURNS:
THE IMPORTANCE OF CONTROLLING
FOR CASH FLOW SHOCKS
by
Maria Ogneva
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(BUSINESS ADMINISTRATION)
May 2008
Copyright 2008 Maria Ogneva
Object Description
| Title | Accrual quality and expected returns: the importance of controlling for cash flow shocks |
| Author | Ogneva, Maria |
| Author email | ogneva@usc.edu |
| Degree | Doctor of Philosophy |
| Document type | Dissertation |
| Degree program | Accounting |
| School | Marshall School of Business |
| Date defended/completed | 2008-03-10 |
| Date submitted | 2008 |
| Restricted until | Unrestricted |
| Date published | 2008-05-02 |
| Advisor (committee chair) | Subramanyam, K.R. |
| Advisor (committee member) |
Beatty, Randolph DeFond, Mark Hann, Rebecca Jones, Christopher S. |
| Abstract | Francis, LaFond, Olsson, and Schipper (2005) document that accrual quality is inversely related to the cost of equity capital. However, Core, Guay, and Verdi (2007) find no association between accrual quality and future stock returns and conclude that there is no evidence that the stock market prices accrual quality. I hypothesize that Core et al. 's result arises because poor accrual quality firms experience negative cash flow shocks in the future, which results in negative returns that offset the higher expected returns for such firms. Consistent with this prediction, I find a significant negative association between realized returns and accrual quality after controlling for cash flow shocks, either by including proxies for future cash flow shocks in asset pricing regressions or by using an accrual quality measure that is less correlated with future cash flow shocks. This result is robust to properly specified and standard asset pricing tests. Overall, this paper adds to the growing literature suggesting that accrual quality is linked to the cost of capital. |
| Keyword | accounting quality; cash flow shocks |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Type | texts |
| Legacy record ID | usctheses-m1219 |
| Contributing entity | University of Southern California |
| Rights | Ogneva, Maria |
| Repository name | Libraries, University of Southern California |
| Repository address | Los Angeles, California |
| Repository email | cisadmin@lib.usc.edu |
| Filename | etd-Ogneva-22080502 |
| Archival file | uscthesesreloadpub_Volume14/etd-Ogneva-22080502.pdf |
Description
| Title | Page 1 |
| Contributing entity | University of Southern California |
| Repository email | cisadmin@lib.usc.edu |
| Full text | ACCRUAL QUALITY AND EXPECTED RETURNS: THE IMPORTANCE OF CONTROLLING FOR CASH FLOW SHOCKS by Maria Ogneva A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (BUSINESS ADMINISTRATION) May 2008 Copyright 2008 Maria Ogneva |
